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Apartment prices: The Minister of Housing is fueling the rise in prices - Walla! Of money


Zeev Elkin's announcement that apartment prices will continue to rise by a significant percentage is the politician's victory over the responsible adult. This is how the minister inflates apartment prices

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Housing prices: The Minister of Housing is fueling the rise in prices

The Minister of Housing's announcement of a significant increase in apartment prices is intended to strengthen the difficult legacy he has received.

But at the same time, it could also spur many Israelis who have hitherto sat on the fence, to invest in the real estate market and thus further distance the coveted apartment from those who really need it.


  • Wolf Elkin

  • Minister of Housing

  • housing prices

  • Investors

  • Apartments for investment

Sonia Gorodisky

Friday, 18 June 2021, 07:32 Updated: 07:58

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The new Minister of Construction and Housing, Zeev Elkin, spoke at the contractors' conference in Eilat, in an unusual way. "The public does not feel it yet, but we are in a new round of housing crisis. In the last two years the government, which was completely paralyzed, has missed the housing industry and together with the corona it will cause a rise of more than 5% in prices," the new minister said.

Why is this supposed to bother us? Although the expected rise in housing prices has long since become a consensus, when it is heard from those who trust the housing and construction market, it takes on a different context. Statements of this kind further fuel the demand in the burning real estate market anyway. Needless to say, Elkin is probably right. Housing prices are expected to continue to rise, the troubling thing is that it does not bother anyone.

If until now we have become accustomed to hearing finance and housing ministers make promises about curbing real estate prices - promises that have not been fulfilled, announcing a variety of plans that are supposed to address housing prices - that have not really worked, Elkin has chosen a different tactic. And he probably won't be the one to stop him, so he chooses in advance to present a black picture - at best he will succeed, and in the more realistic scenario he will be able to say at the end of the term "I told you so".

Minister Elkin noted in his remarks that today the "dry data" required 147 months' salary to purchase an apartment - twice the average in OECD countries.

That is, for young couples buying an apartment remains a dream.

And according to field data, the volume of mortgages being taken is reaching new highs.

Mortgage advisers will tell you that there is a huge demand for counseling sessions with them and the apartments are hijacked.

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Housing Minister Zeev Elkin took office this week.

Could not resist (Photo: Roni Knafo)

The dilemma of the Bank of Israel

At the beginning of the previous decade, the Bank of Israel limited the financing rates and the prime component to cool the housing market, but recently the opposite has happened - the central bank is taking mitigating measures - working to lower mortgage rates and thus add more fuel to the fire.

Only a few months ago the one-third of the prime limit was removed and now the interest rates, according to the Association of Mortgage Advisors, are from the lowest that were here.

Apart from the favorable financial conditions, the supply of housing is also insufficient to keep up with the rising level of demand in the economy.

During the Corona period the construction of many projects was halted for extended periods of time, construction starts declined due to the shortage of manpower, and thus the supply in the housing market became even smaller.

Add to that the "occupied demands" that are being released now, after all, many have waited with important decisions like buying the apartment to end the corona period.

So supply is small, and demand is rising even more, and at the same time, last year former Finance Minister Israel Katz lowered the purchase tax for investors and their number doubled compared to last year. It

should be said that in Europe the situation is similar and even worse. The uncertainty in the financial markets due to the corona crisis has led many to turn to the real estate market which is considered there as a “safe investment”.

Where is the danger? If interest rates rise sharply, demand falls and apartment prices fall at once, and people are left with inflated mortgages - a "real estate bubble". The

Bank of Israel is now facing a challenging situation - when at the beginning of the previous decade it acted to "cool" the real estate market. The rest by raising interest rates, prices were lower and the risk from the move was lower.

In the last decade apartment prices have doubled,So now raising interest rates for this purpose could be risky and also not at all appropriate in the environment of the economy recovering from the crisis.

The solution that is still available to the Bank of Israel, the "responsible adult" of the economy and the body without political interests, is to "cool" the enthusiasm of investors.

This is possible if it exceeds the capital allocation on investor transactions.

This does not require legislation, but a simple decision that can cool the real estate market a bit.

Minister Elkin speaks at a conference in Eilat

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Minister Zeev Elkin: "The rise in housing prices we saw today is not the end of the story" (Walla system!)

Elkin presents: When politics wins responsibility

Back to the words of the Minister of Housing, in Eilat: Imagine that an Israeli family, who has a million shekels available, listened to him. What do you think she will do with the small capital she has accumulated? Where will you invest them? When the housing minister predicts real estate prices soar, its indecision becomes simpler: Now, an Israeli cabinet minister marks because irrigation confident with immediate yield of a significant percentage, what is better?

If so will the share of investors in the market will increase, prices will climb further, The apartment will stay away from first-time home buyers, that is, those who really need it, and at the same time, the risk of a real estate bubble forming will increase. Does the Minister of Housing not understand this?

The answer, at best, is "no", that is - the minister did not think to the end of his remarks. This is unpleasant, but still better than the second possibility that Elkin knew exactly what the consequences of his remarks might be, but preferred to continue to paint a grim picture, according to which he inherited a pre-lost war.

There is no doubt that Elkin got a real estate market in a problematic situation, but if already in the first battle between what should be said a responsible housing minister and what a politician should say, the latter won, this is not a good omen for who should address the important issue of housing prices, issue That many in the industry believe it could lead to social unrest.

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Source: walla

All business articles on 2021-06-22

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