When you build new housing (as in, increase the number of units of housing that are available in total), you make your lot more valuable, which makes other lots less valuable. So a developer makes makes money by making their lot more valuable, but they do not "make real estate more valuable" generally.
This is much like, you know, every other thing in the world. When a shoe manufacturer makes shoes, their shoes have value, but the value of all other shoes are slightly less because there's now one more competitor for demand for all those other shoes.
With housing, it depends. There can be a proximity effect. The old house next to all the nicely redeveloped new houses is now worth more, even if the total number of bedrooms hasn't changed during the redevelopment, because it is in a nicer environment (and a buyer might want to redevelop the old house, and live in a nice house in a nice suburb).
Long term development is good for everybody's property values, in the exact opposite way that losing businesses and residents is bad for those property values. Phoenix vs Detroit, say.
"Demand" is a dynamic thing, it responds to changes in the built environment of a city, region, or nation. London didn't spring into being fully-formed and fully in-demand at today's levels. It found a virtuous (for property-owners financially) cycle of both increasing housing units and increasing population and demand for certain areas.
There are in-demand cities that have relatively affordable housing (like Tokyo), that allow lots of housing to be built, and cities that have extraordinarily high costs of housing (like London) generally have a hard cap on housing development.
While there is obviously some amount of this whole thing where more housing allows more people to come to a city which can in some circumstances drum up more jobs or whatever, I think it's a significant oversimplification to say that more housing increases property values in the long run. Ceteris paribus, more housing depresses property values. It is possible for there to be a feedback cycle where more people in the area increase the overall prosperity -- and thus property values -- of the area, but I do not think that generally more housing is the most important factor there.
This is much like, you know, every other thing in the world. When a shoe manufacturer makes shoes, their shoes have value, but the value of all other shoes are slightly less because there's now one more competitor for demand for all those other shoes.