It is of great importance to note that, the factors that contribute to the changes of demand either interplay in a way or are independent. In this case, the sharp rise in prices of houses in certain areas of Melbourne can be attributed to the low rate of supply of houses while their demand keeps increasing. For instance, change in population either through immigration, high birth rates, future expectations, and the rates on interest can be described to have caused this sharp increase in the prices for houses in that region.
Certainly, the high number of immigrants, future expectations of higher prices, and the rising cost of rental houses can be argued to be a major cause of higher prices for houses in certain areas of Melbourne.
As it has been revealed, the high demand and limited supply of houses in the region have contributed to the high pricing of houses in the areas as the two concepts interplay in a way. More precisely, when demand is in excess and supply is limited, prices of the commodity involved increases automatically until a certain level when the amount demanded equals the amount supplied, a price called equilibrium price.
The number of houses demanded or supplied is dependent on their prices. Generally, the high demand for houses in the areas of Melbourne has been triggered by their low supply which consequently resulted in the hiking of their prices.
