- Jun 23, 2008
No credits for partial answers.By holding unused and unproductive land, you limit the amount of land available for productive purposes and mathematically increase land prices, travelling distances and other things.
It's economics 101, less of a product, higher price.
And in order for that demand to happen, people actually have to be interested in the area. If everyone in the area is speculatively holding on for land, no development happens and the prices go down. All people who are "speculating" are doing is setting the price of the land for what it is actually worth to develop.
They are also paying a large opportunity cost in terms of lost revenue by not developing said land, if there is indeed demand for the land, as well as if they do actually make money on that land, they will get hammered by CGT.
You are also missing out on the other side of the equation, people who do badly at speculation. And statistically, given predicting the future is actually rather difficult, most people who do speculate on property end up severely losing money.