Markets and the Structure of the Housebuilding Industry: an International Perspective
Urban Studies, Vol. 40, Nos 5–6, 897–916, 2003 Markets and the Structure of the Housebuilding Industry: An International Perspective Michael Ball [Paper first received, November 2002; in final form, December 2002] Summary. This paper sets out to examine why the modern housebuilding industry is organised in the ways it is and to identify some implications for the wider operation of housing markets. It concentrates on advanced economies and the impacts of market conditions, regulatory con- straints, production characteristics, institutional structures and land supply. Widespread differ- ences occur across countries in the ways in which housebuilding is institutionally structured. It is argued that these differences are generally explicable in economic terms and that regulatory practices determine much of the variation. Introduction This paper sets out to examine why the mod- neatly into the standard economics lexicon as ern housebuilding industry is organised in a competitive industry. The well-known the ways it is and to identify some implica- results for a competitive industry from tions for the wider operation of housing mar- the structure–conduct–performance paradigm kets. It concentrates on advanced economies would, therefore, seem to be reasonable hy- and the impacts of market conditions, regula- potheses to apply to housebuilding: namely, tory constraints, production characteristics, that long-run risk-adjusted returns are low institutional structures and land supply. and that housebuilding costs closely reflect At first sight, the discussion seems simple the marginal costs of inputs. In a dynamic and straightforward. Housebuilding is char- framework, there is a cyclical effect with acterised by the existence of a large number supply constraints pushing up builders’ mar- of relatively small firms.
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