ABSTRACT
So far, we have discussed simple accounting methodologies for assessing demand-supply gaps in residential real estate markets. Such methodologies can help assess niches in target groups and product types in the shorter run, but are not sufficient for fully evaluating residential development potential because they ignore the dynamics of the urban residential markets. In particular, they do not reflect the important behavioral relationships between prices and the number of demanded units, between prices and the number of units supplied, and the feedback effect of changes in demand and supply on prices and rents. The accounting techniques are particularly shortsighted in their treatment of supply in that they usually examine short-run available supply without regard to future expected supply.
