As a few people have mentioned, it is not just supply or demand (or both), but there are other factors. Speculation is a big one. Unfortunately speculation is one of the few factors that can break the general economic rules of supply and demand. That's why stock prices cannot be predicted mathematically with any accuracy. Or the best football team doesn't always beat the second best.
Human factors.
That said, if you just look at supply and demand, economics 101 states that if prices increase, generally demand for the good decreases. The opposite is true of supply whereas as prices increase, supply typically increases to attempt to cash in. That means that generally they work in lock step and you can't just blame 1 or the other for high prices.
You have to look at them as a unit and understand that if:
A. current prices result in
B. sales then
C. the market increases because clearly demand is high enough to sell and prices are clearly not high enough to result in less demand
So when they target demand specifically aka by cutting out a segment of the market like foreign investors, the relationship should result in the current supply being greater than the demand or at least that is the goal. This results in the price of goods flat lining or decreasing in an attempt to entice more demand. Ultimately the utopian goal is for demand and supply to be equal.
In the case of housing, there are a lot of human factors that enter into the equation which is why just focusing on supply and demand is foolhardy. For example, the cost of building a single unit in Vancouver is different from in Richmond, or Surrey, or Burnaby. Even costs of various types of units cost differently in the same city.
Also consumers are looking for varying levels of goods. We seem to lump all "housing" together, but that's like saying every car on the road is exactly the same. They aren't. Some people want or need an SUV, others a sports car, or other a 4-door sedan. They are all different products that have different levels of supply and demand associated based on the market looking.
So saying "densify more" is also foolhardy because if you build 10 million new condos that is like saying "we'll reduce car prices by building 10 million more pickup trucks." What about all the consumers that don't want or need a pickup truck? I have a wife and child and we're looking to add to our family.
I am NOT in the market, nor ever will be, for a 1 bedroom condo to live in. So you could build 10 million more and that won't change the fact I am in the market segment looking for 3+ bedroom something near where I work.
Unfortunately all the above I just stated is too long for twitter of sound bites on the news, so everyone just boils things down to surface arguments that actually have nothing to do with cause or effect.
That means those saying MORE SUPPLY are probably as right as those saying LESS DEMAND and by right I mean making things too simplistic which leads to governments knee jerk reacting to headlines and passing legislature that is not well thought out and doesn't actually address the real problem.
That said, the last post above from whatnext about foreign investors targeting Surrey, yup. Because the prices are low in Surrey and guess what, it is resulting in developers jacking up prices. Look into the Park Boulevard thread to get an idea how Concord has in essence doubled the price of 1 bedroom condos in an area and are pretty much specifically targeting investors be them foreign or domestic.
Human factor popping up again... plenty of supply... but human (developer) greed breaks the synergy of supply and demand. That said, if all the units sell for the high prices, then isn't that how capitalism is supposed to work?
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