Can House-Price Fluctuations be Dampened? - Part 2
Monetary review, 1st Quarter 2011
This article describes how the large house-price fluctuations entail considerable
costs to society. It is demonstrated that the freeze on nominal property value tax
and the introduction of deferred-amortisation mortgage loans have amplified
the general cyclical fluctuations in the Danish economy by causing larger
fluctuations in the housing market. Restoring the link between the current
property value tax and current house prices can contribute to more stable
economic development and to preventing further erosion of public revenue.
Gradually phasing out the use of deferred-amortisation loans would also
enhance the stability of the housing market. These reforms can be implemented
without any considerable short-term adverse effects on house prices.