I'm looking for a more general and principled answer and use Scandinavia today only as a sketchy example of the kind of scenario I'm asking about.
I live in Scandinavia where house prices has had an uninterrupted bubble boom during a quarter of a century now. Households are the most indebted in the world. Mostly of course in the form of housing loans. If the housing bubble would burst in Scandinavia as it has done in many other places the recent decade, certainly all banks will immediately be wiped out and millions of Scandinavians will become completely destitute for the rest of their lives with unpayable debts and no property to match it as a deep depression sets in.
Some key figures (for Sweden, not the oil country):
- +7% housing prices on average per year since 23 years, with record increases the last couple of years.
- 0% growth in GDP per capita last 10 years (housing prices doubled anyway).
- 1.2% (positive) CPI-inflation since 10 years.
- 0.8% (positive) consumer housing loan now offered in ads without negotiation (after tax deduction) while central bank interest rates are stuck deep into the negative.
Imagine that the government makes a law that forbids anyone to sell any housing at a lower price than what it was last bought for. Thus per definition the house bubble cannot burst, not legally anyway. And everyone is safe, the crash prevented and everyone will keep making millions simply by borrowing more for risk free "investing" in simply owning ones own house, right?
What would the negative consequences be and how would it play out?