Common economic thinking dictates that an increase in price should lead to an increase in supply, and that an increase in supply should then lead to a decrease in price. According to Maarten van Poelgeest, former alderman of Amsterdam, the opposite is happening in Amsterdam and other popular cities. He is quoted in an article in De Groene Amsterdammer as saying:
‘Hoe meer er gebouwd wordt, hoe aantrekkelijker de stad wordt. Er komen meer voorzieningen, er komt meer reuring. Nieuw aanbod maakt de vraag dus juist weer groter – en de huizenprijzen hoger.’
’The more there is built, the more attractive the city becomes. There will be more facilities, there is more bustle. New supply therefore makes the demand even larger – and house prices higher.’
The reasoning by Maarten van Poelgeest appears plausible, but is there any evidence that this is actually happening? Is there evidence that an increase in housing supply leads to an increase in house prices, due to housing in the area becoming more attractive?
I'm looking for an answer based on empirical evidence from trends in the past up to the present, in order to present the claim/hypothesis by Maarten van Poelgeest up to the best available measurements.
NB: I am emphatically not asking just for a correlation. A correlation between increase in supply and increase in price can easily be explained by the reverse of the causation I'm asking for here. I'm aware that causation is harder to provide evidence for but it should not be impossible.