[bitshiftfaced]

I don't see that as a fair comparison. The number of people who are rich enough to buy a particular home for more than the hypothetical actual value is orders of magnitude greater than the number of people who can afford to buy up all the lots around a home at a premium and affect its property value. As a result, the perceived threat to the homeowner is substantially different. I also think you're ignoring the psychological costs of this. It doesn't actually have to happen, just the potential that it could happen would be a real fear for many people. Moving is one of the most stressful events in people's lives, much less unplanned moving. There's also empirical data showing negative outcomes for children.

[eru]

If that kind of fear is a problem for people, it will just be reflected in lower market prices for land.

Someone who has more of a fear for can put up her self-declared land value. They'll pay a bit more in recurring tax, but would get a significant windfall, if their fear were to come to pass: Yes, there might be some psychological downsides to moving, but getting a extra few million dollars (or whatever) has psychological upsides, too.