Demand for Housing

Many products of the construction industry are built for the collective enjoyment or benefit of a large group of persons, e.g. schools and reservoirs, and the purchase of the service or benefit may be made by a group other than the users. These are the social-type goods discussed in Chapter 6. Another group of products is desired because they enable some benefit to be produced, e.g. industrial and commercial building discussed in Chapter 5. The construction of housing, however, enables a benefit to be available for direct consumption. In a minority of cases the client of the industry is the user, as in privately commissioned housing. Most housing, however, is either produced by a private developer in advance of orders by users or by a public authority for renting (or sale) to users. The private developer is known as a speculative builder — speculative in the sense that there is uncertainty as to whether the dwelling will be sold. In this sense at least a large part of the output of manufacturing industry is speculative. The manufacturer of toothbrushes does not know his clients when he produces the brushes. However, the sheer size of the purchase of a house and the fact that it is a postponable capital transaction renders speculative housing a more uncertain business than the manufacture of toothbrushes.