To play devils advocate, surely removing the artifical limits won't help in the long run as the city will just continue to spraw until it hits natural limits?
Most American and European cities are significantly less dense than their Asian counterparts. There's a long way to go before they reach any natural limits.
which comes back to the original question - people who are used to larger spaces prefer to continue having those larger spaces. So houses are more sought after, which causes apartments' prices to not grow, which causes fewer of them to be built (as not as high appreciation).
