House price bubbles and the advantages of stabilising housing taxation

Authors Klein, Asbjørn; Hviid, Simon Juul; Hvolbøl, Tina Saaby; Kramp, Paul Lassenius; Pedersen, Erik Haller
Subject Danish Economy; Other economic analyses
Type Monetary Review  
Year 2016
Published 18 October 2016
The housing market has been growing over the last three or four years after the strong downturn in the wake of the housing bubble in the mid-2000s. At the national level, house price developments overall appear sustainable, but developments in particularly the Copenhagen housing market give cause for concern. Fluctuations in house prices – and hence the risk of house price bubbles – can be reduced by efficient housing taxation. But the nominal freeze on property value taxes and, to a lesser extent, the cap on the increase in land tax have eliminated the stabilising effect of housing taxation. It is important that housing taxes regain their position as economic stabilisers by ensuring that taxes reflect the value of house prices.