In Santa’s hideaway at the North Pole, there are a thousand large, equal plots of land and a thousand elf families.
Five hundred of the elf families own all the plots. Some have just one plot; no family has more than five plots. The other elf families have no land.
The currency is the Santo. Santa is considering introducing a land value tax and moving the currency onto the blockchain.
Until now, Santa had forbidden subdivision of plots and limited each plot to one detached, single family house of a given size. Every plot has a house. The houses are all pretty similar and are currently each worth 1000 Santos. Free and fast flying reindeer transport means there is no premium for being in the centre. Each house costs 200 Santos to build.
Santa has suddenly decided to allow terraced housing or mansion blocks on each plot, up to a maximum of ten homes per plot. The homes allowed are so spacious and attractive that they are just as appealing to the elves as the small single family detached houses they replace.
Each new terraced house or flat in a mansion block costs 250 Santos to build.
When everything has settled down, what will be the price of a home?
More details on the economy
There is a full-reserve banking system, and the only loans are peer-to-peer. There is no deposit guarantee or discount window. Interest rates are currently 2% a year (for short and long periods) and there is no inflation. The currency is freely floating and there is plenty of international capital available for loans. Santa refuses to disclose his gold reserves.
Elves have no internationally recognized papers and find it impossible to get jobs abroad. No-one else knows where Santa lives so there is no immigration.
There is a highly developed competition law in Santa’s hideaway and any communications to create a cartel are punishable by death. All the elves are aware that Santa knows when you’ve been naughty.