How do supply and demand specifically affect property values?

In the context of real estate, property values are heavily influenced by the dynamics of supply and demand. When there is high demand for properties in a particular area and simultaneously low supply available for sale, this creates a competitive environment among buyers. The increased interest from buyers can lead to bidding wars, where individuals are willing to pay more than the asking price to secure a property. As a result, property values tend to rise due to this imbalance, illustrating basic economic principles where scarcity, when paired with strong demand, drives prices upward.

This principle indicates that in a favorable market condition—where demand exceeds supply—property values increase as buyers are competing for a limited number of properties.