| Abstract: | This paper examines the effectiveness of capital gains tax as a stabilizer of real estate prices. Capital gains tax is shown to induce long-term holdings of real estate through a tax deferral effects and hence negate the intended effect. Furthermore, it is shown that a change in the tax rate may stabilize the price only temporarily without any lasting effect on the speculative holdings of real estate. Of course the presence of property tax, for example, may affect speculative activities differently—a subject into which this paper does not delve. 323] |
