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The typical reason why the price is whatever people are able or willing to pay for an item, is a lack of competition.

Right. If you want to buy a house in a desirable place, you’ll have to compete with other people who want it.

Yes because the supply of new homes is artificially kept low by planning laws.

That’s true practically everywhere in the world. Can you name a place you’d like to live where it is not?

> That’s true practically everywhere in the world.

True.

Supply of new homes is cebtral London is artificially kept low by laws of physics.

Not every market is like market of shoes, that allows infinite competition and substitution.

you could replace one 2000m^2 mansion with a Singapore-style skyscraper and create 2000+ new 1-bedroom apartments ...

I didn't know the laws of physics was what kept the greenbelt around

It’s not about buying a house in a place. These are the construction costs if you already have the place.