You can remove demand by making the real estate market uninteresting to speculators. You can do that by placing sufficient tax on the locational aspect of the value of real estate.

Here is why it works:

To a potential user (non speculator) real estate of is interest because it has the potential to allow him to create wealth and so he compares the total price (including any taxes he may have to pay) with what he thinks he can make out of his pressence in the property (wages / utility) And so the presence of taxes upon the property make no odds to him, because, if there are taxes, the amount he will bid for the house will simply be reduced by the sum total of taxes - and this is true for everyone else ..and so bids for that house will be reduced by the total of taxation. In other words, the exchange price will drop and the remainder of the 'house price' will be paid by him in taxes. Notice that costs for him have not risen, even though taxes have been collected. If the taxes were taken away from the scenario he would be paying the same amount for possession, but would be paying a larger portion of interest on his loan rather than taxation. Now we come to a speculator - For him this situation is intolerable; he is not interested in using the property itself, but rather in collecting the rise in price of the location. If any taxes will remove from him all or the greater portion of this rising price, then he simply will not be interested and will leave the property to be bought by someone who wishes to use it to create new wealth with it. Speculators will, therefore leave the market to people who wish to use real estate and real estate prices will fall due to reduced demand if taxes are leveraged correctly upon real estate.

“Lets run with your tax idea. Assume the necessary laws were put in place to target speculators as you describe.

If the speculators find that there is no profit in buying they will invest somewhere else.“

Excellent. Perhaps he could start a business, perhaps employing people to create wealth.

“What property is the speculator buying? If that property was not purchased by the speculator who would step in? “

A user - that is somebody whose intention is to use the property to create wealth. Do you see how this links to my previous comment? Already we see how a potential speculator is now encouraged to abandon speculation as a business and instead set up some kind of production, perhaps even at the site he would have previously vacuously used merely for its rising price. Instead of buying this property, then perhaps looking for another to buy, he may only make the purchase of this site profitable for himself by using the site in some way to produce after he gains it. As a speculator he is out of the market, but he may still wish to invest in production, and that is one of the keys. Let me make this clear, one of the advantages of this tax is that all the money that is presently being ‘invested’ to do little but make life harder for people by bidding up real estate prices, will instead be used to employ people and create wealth. The free ride ends though.

“As we are talking about speculators I am assuming that we mean people who are in for the short term. Many landlords are long term investors so largely fall outside the speculator label.”

There is no need to label speculators with any legal definition; the taxes would simply take away the speculative profits from the location-al aspect of real estate.

Funny you should attempt an exception for long term speculators, as they tend to be the largest and most destructive speculations
 

“ If we believe that speculators are the ones buying off-plan so they can sell before completion then we will see a decrease in demand for new build property.”
 

No, rather there would be a dramatically increased incentive to create new houses. 

Presently, the house price boom values pass into the market for available land to build new houses and locks up the supply of land by encouraging speculation and hoarding in the available land. This pushes increased costs to house-makers who may or may not recoup these costs..at best, it becomes far more risky than it need be. Using the tax, with a metaphorical stroke land speculators are taken out of the market for available land and the price drops and house building becomes less costly. The constructors of houses are not particularly the beneficiaries of housing booms, because the extra ‘profit’ you think they might receive for actually building houses becomes extra costs in production for them. This is one of the principle reasons why housing booms are not properly reflected by increases in housing supply; the underlying necessary supply; the supply of land is absolutely fixed and cannot be produced. And so the benefits of housing booms, no matter what anyone produces or does, go in their entirety to those holding the only thing that cannot be produced; land.
 

“Maybe the reduction will trigger a reduction in prices but supply will stay the same.

Or maybe the builders will build less to match the demand. I would still expect a bit of a price reduction but not a dramatic reduction if supply is cut back.”
 

This is because you aren’t factoring in the fixed nature of the supply of land. You are using a production model, but land isn’t produced and so increased demand does not increase supply, as in production, it rather encourages hoarding.
 

“Some projects will not make sense at lower price levels until the land prices and other costs drop.”

Every project whose selling price is reduced finds that its productions costs are also more than commensurately reduced…which translates into increased incentive.

"Magrathea,

I am not convinced. Maybe I am just slow.

How does a speculator gain? When they buy are they buying raw land or are they buying a property that is used productively while they own the property? You seem to include landlords. As the properties are rented generally why are you calling this speculation?"

I'm not calling it speculation - erm, isn't this the second time I have said this?

Landlords can be called anything you want to call them; the precise definition of a real estate speculator is irrelevant. To clarify, there will be no (or very little) profit in simply and only holding a piece of real estate; that fact directly impacts real estate speculation and makes it pointless.

"Lets shift to a different market for a minute. People who have more cash than they need store it in the bank and they receive rent for that money. They allow the bank to use the funds and the bank pays rent for the money."

Yep

Are you asking how this market is morally different from real estate?

The bank notes do not form any restriction or exclusion upon third parties, real estate does.

Incidentally, you will find that the real value of your pile of notes sitting in a bank vault will reduce slowly over time despite the interest paid. There is a very good reason for this; it is to discourage the mere hoarding of bank notes. A similar effect would be gained in terms of real estate, if buildings (sites) were to slowly devalue as they got older. It is the rising price of the spatial exclusion that makes houses not do this and means they are a focus for a particular kind of useless and destructive economic behaviour.

"If a landlord owns a property which they rent out how is that speculation?"

I'm having to think hard to make a guess at what you are driving at. A landlord who rents out a property is not necessarily engaging in speculation in those acts, however to argue that from that that landlords do not speculate in property values, is nonsense. I can perhaps clarify this by adding that with this tax, whatever the landlord's intentions when he bought the real estate, he will not make money simply and only out of the existential fact that he holds it.

"The tenant gets a home to live in."

The tenant is sold two things, which have separate economic natures and explanations

1. The tenant is sold access to a physical construction we call a house; this was added to the world with human effort and so if the tenant wishes to access this he must pay down through the chain of holders, and compensate the people who made the effort to add this house object - otherwise nobody will make houses. In this particular respect, landlordery is precisely like any other goods or services provision; services (houses) are created using human labour and then bought off the creator.

2. The tenant is sold access to the location / land, which was not created with human effort.

Because the existence of the location itself is not the result of any human effort, there is consequently no economic need to compensate the landlord or anyone else for the value of the location, because neither he, nor anyone else, ever actually ever provided the location. In fact, compensating the landlord for the existence of the location is intrinsically unjust because it allows him to sell, to another, something that can only be sold to someone if it were originally taken, in some manor, from them.

Let me put this another way - The landlord is economically responsible for the existence of the house, and so is rightly and justly paid for it's use, but he is not responsible for the existence or value of the location and so payments made to him for the value of the location itself are not paying him for any value he is actually responsible for. Paying people for the existence of locations is a little like paying people for the existence of the sun, it is intrinsically unjust.

One of the effects of the tax is to remove from the landlord the portion of rent charges he is making for the existence of the location itself. This done, he is left purely with the charges he makes for the services he actually provides (the physical house)

"Assuming there is am ample supply of rental homes then the tenant choose the specific one they rent so they are exercising their right to choose where they live."

This is only partially true, because his choice and bargaining position is moderated by the fact that he has no intrinsic right to be anywhere at all. He had that natural right stripped off him, using force, when land was enclosed.

"The landlord make a return from holding the asset and from the income. Similar to a factory that makes a widget. At the end of the business the asset is sold off similar to a company closing and selling off its factory/land."

As I pointed out, here are some similarities, but vast, wobbling and pertinent differences.