Can a slow crash happen?

When looking at housing in Japan, you may wonder what economics actually taught you anything. Pricing models are all ex-post.

Demand -> high prices? Not really. Quick supply -> lower prices? Not really. Land scarcity -> appreciation? Not really.

A possible reason behind housing prices, here and elsewhere, may all come down to cultural/behavioral traits of the society.

After Japan 1989 crash, my dad could buy a property in Taipei for half price, and I bet he bid over ask.

A fear since then could last for 20+ yrs, and land is still depreciating.

It seems to me, before 1989, the fear hadn’t been discounted to PV. And now it’s paying it back w/ growth rate much lower.

And we human beings won’t learn the lesson (not the lesson of a past crash, but a lesson of paying back for decades).

What policymakers can do, I think, is to include this “fear” (i.e. catastrophic costs to econ) in homeowners’ PV calc.

And then extend it to 30-50 yrs as PMT (i.e. a slow crash). What would this regulation be?

Hard to explain in 140 characters, but…

Finally some well known economists start to talk about it:

Nobel Prize winning economist proposes capital gains tax on luxury real estate

The bottom line: a crash will happen one day, and we don’t want future generations to suffer because of us.

We may include interest payments in the exempt, but reno = consumption = economy, which is already factored in exempt.


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