Using demand and supply analysis, how would the fact that young Australians now prefer to rent than buy change the price and quantity in the housing market (keeping all else constant). Briefly contrast the impact of a change in preference to the counter explanation that it is prices rising that is reducing quantity demanded for housing. Explain.

The law of supply and demand is a basic economic principle that explains the relationship between supply and demand for a product or service and how interaction affects the price of that good or service.

The law of supply and demand is prominent in the housing market. Where there has been a high demand for properties in a specific location and a lack of supply of quality properties, prices tend to rise and there is no demand for and oversupply of properties. Many young adults are not in a hurry to lay down their roots because they are prone to travel. The trend began with large firms buying cheap homes during the recession and turning them into cash-generating rentals. A change in housing preferences may have a significant impact on the number of homes requested. If preferences change, there will be a decline in demand in this type of housing.