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:
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.