On the demand side, such factors include demographics, migration, growth in household disposable income, features of the tax system and the average level of mortgage interest rates. On the supply side, factors include improvements in the existing housing stock, the availability of suitable building sites, and construction costs.
Although the demand for housing can shift quite dramatically in a short space of time, the housing stock is relatively inelastic. It takes time to build new houses and the capacity of the construction sector to provide them also takes time to adjust to variations in demand. Accordingly, housing prices are prone to quite significant short-term movements.