PM unveils program to battle realty bubble
Dramatic reforms to address housing crisis; incentives planned to make it easier for young couples to purchase first apartment
Prime Minister Benjamin Netanyahu and Minister of Housing and Construction Ariel Atias on Monday announced a series of dramatic steps and reforms aimed at tackling rising real estate rates. They believe these incentives will make it easier for young couples to purchase their first apartment.
The first step included in the reform is a 15% discount off the purchase of private lands in Land Administration tenders which will be offered to contractors who complete at least 80% of apartments in a given project within a 30-month time frame.
The second step is the reduction of the Betterment Tax from 45% to 20%. The discount will be a one time reduction given in 2011 and on the condition that the construction will be completed within 30 months.
The third step included in the reforms is offering local authorities the opportunity to collect development taxes for public institutions and public areas directly from contractors. As of now, this obstruction makes it difficult for local authorities to issue construction permits which leads to delays in housing projects.
Prime Minister Netanyahu said, "Over the past five years we have witnessed a steep rise in housing prices, which is a burden on the entire population and especially on young couples. The first step taken in building a life together is becoming harder and harder, the supply and demand issue is the main problem in the housing market.
"The short term goal of the steps we are presenting today is to alleviate the difficulties young couples meet with when attempting to purchase apartments," he said.
According to Minister Atias, "the source of the current housing shortage is the lack of available properties spread out over a 10 year period. Over the last year, the Housing and Construction Ministry and the Land Administration increased the land development to a level of 30,000 housing units."
Atias added that "the purpose of the steps announced today is to offer a solution for young couples struggling under the burden of prices and commitments they are forced to spread over a 20 year period. We must offer young couples incentives and hope that the Finance Ministry will meet these needs."
Finance Minister Yuval Steinitz added that "the current real estate market situation and especially the difficulty young Israelis meet when trying to obtain affordable housing, necessitates long term solutions.
"The reform plan, which was consolidated together with the housing minister and with the prime minister's support, is the first among a group of steps under consideration and its goal is to encourage the construction of housing units in the center of Israel and the periphery. The Finance Ministry continues to hold meetings with relevant authorities and we hope to introduce additional steps."
Atias: This is Israel's main problem
The press conference was held following a meeting Netanyahu held with the ministers of housing, finance and interior as well as the Governor of the Bank of Israel Stanley Fischer. The meeting is the third for the group, which has been trying to find solutions to housing market price hikes and a lack of available apartments throughout the country.
Last week, Governor Fischer said that the housing prices were the most influential factor in inflation rates. Fischer, who presented a periodical review to members of the Finance Committee, estimated that if the rise in housing prices weren't as high, inflation rates would be around 1% rather than today's rate of 2.5%.
Last week, Atias also referred to the issue when he said that "the rise is apartment prices is the main problem in Israel today and it causes sleepless nights in every household, including mine."
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