How does scarcity influence property value?

Scarcity is a fundamental economic principle that asserts that the limited availability of a resource increases its value. In real estate, when a property type or resource becomes scarce due to limited supply—such as land in a desirable location—the demand for that property often results in an increase in its value. Therefore, decreased availability caused by overabundance of similar properties can lead to a decrease in value for those properties. Conversely, abundant availability would generally lead to a decrease in the perceived value of the properties because buyers have many options to choose from.

While scarcity is directly related to the value of properties, it is critical to understand that it is not simply a matter of abundance or demographic factors alone; rather, it is a concept that underpins economic principles in real estate transactions. The impact of scarcity reflects in how buyers perceive the value of the remaining properties and how they act in the marketplace. Thus, scarcity can be a crucial driving force in determining property values, especially in competitive real estate markets.