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The drivers of house prices

May 2019

The house market is not a global market like commodity markets. Thus, if house prices in Cape Town are cheap relative to Melbourne, potential buyers of houses in Melbourne do not flock to Cape Town, thereby pushing up prices in Cape Town. Put differently, fixed properties – with the emphasis on ‘fixed’ – are not globally tradeable or transportable like crude. Because one cannot live in Cape Town and commute daily to Melbourne, prices in Cape Town will not eventually – through arbitrage – equate those in Melbourne. But one can buy Saudi-Arabian crude (a transportable commodity) and deliver it in South Africa.

Read more: The_drivers_of_house_prices_May19

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