Think of it as a tax just like on land, but for buildings.
The reasoning is that housing represents an asset that should not be bought just for speculation, i.e. buy it and let it sit empty until the price is high enough for the investor to make a good profit. Of course they're free to do just that, but all housing which people can live in, are taxed as if you had that income.
It’s the same in the Netherlands.
Instead of counting how much you earn from your capital, the tax administration estimates that you earn about 5% and taxes you on that (about 30% iirc).
But hey, if you make above their estimation, you don’t pay extra. But if you don’t invest, you still pay...
I really like how simple it makes the tax calculation (at least when you know how to value your assets).
It has changed in NL. It used to be 1.2% (it used to be 30% of 4%, I believe, but it was a bit before my time) on the value of all your assets (so what you said), but now they have a progressive system because the assumption that you make 4% on your investments has changed, the 30% stayed the same. Their assumption changed to: if you have less money you have relatively more money on the bank.
The actual calculation is a mix from all the brackets. E.g. if you have 1 million euro, then 71.650 is taxed at 0.58%, the bulk at 1.33% and a bit at 1.68%.
The progression goes as follows (I'm too into this apparently, forgive me):
It's simply a fairer way of taxation. Suppose that you own a house that you rent out and live in another house for rent. Then you obviously have to pay taxes on rental income. If you live in a house that you own, you don't have to pay taxes in most countries, although your financial situation is basically the same.
It makes sense as a way of taxing a secondary residence, but for a primary residence it makes no sense. What if you are old, or disabled, or unemployed? Are you forced to sell your house to pay this tax?
You could also rent it to someone other than yourself, pay your taxes on that income and use the profit to pay for a cheaper accomodation.
That does mean you can't use your own home as a safety for when you're old and poor, but that doesn't necessarily make the tax bad. It just means you have to change strategies and invest your money productively. In practice I'd expect the number of people who suddenly find themselves unable to afford even just the tax on what they'd have to pay to rent their own property to be quite small.
(Genuine, not rhetorical question.)