"The rise in housing prices is not good for contractors," explains Raul Srugo (58), president of the Builders of the Land Contractors Association, since the beginning of 2019. Srugo also sharply criticized Minister Zeev Elkin's "target price" program, which recently made headlines again.
Srugo believes that the plan is not the right direction to solve the cost of housing. "This program will help mostly young people, but it does not solve the housing crisis. The solution must go through increasing supply. As long as supply does not increase we will continue to see price increases. Companies compete for land price so I expect that even under the program, developers will continue to compete More, and so prices will continue to rise.
"Eligible people, especially the young, will receive a 20% discount, but the discount will be from prices that continue to rise. In addition, the proposed solution is about 30% of the market and to make their apartments cheaper, the apartments are more expensive. The contractors will not fund the plan In a 10-apartment building, for example, six apartments will be allocated to those eligible - by the way, a disproportionate allocation to a market problem - so the 20% discount will have to be absorbed by four free-market apartments. "20% for six apartments. In my opinion, Elkin is drawn to another patent, reluctantly. He knows this is not the solution, but he wants to help the weaker sections to buy an apartment, until another solution is found."
An example of housing prices is cement prices. The Contractors Association was in a position to impose a "flood levy" on the cement. Is not this a demand that raises housing prices?
"Cement from Turkey and Greece is sold at prices that are 30% -15% lower than their cement prices. This definitely indicates the price of the float (a price lower than the cost per seller, which is intended to exclude competitors from the local market; AB). The Competition Authority objected to this levy and the Ministry of Economy was in favor of a levy at some rate. We in the association have taken a balanced and responsible approach. Cement is important for construction, but it does not represent a significant percentage of construction costs. Israel Katz, the finance minister, opposed the levy, and Economy Minister Amir Peretz supported the levy. We said to impose a 15% levy and during the levy period to receive a commitment from the local manufacturer, Nesher, that prices will not increase during the levy period. But they did not accept our position. "
And what about foreign companies? Even when a Chinese company offers a price that is 40% lower than local bidders, do you think you should be preferred?
"I propose to check the actual price - not the initial price offered in the tender, but the price at the end, because these are not such differences. Secondly, Israel can not allow unfair competition. The same restrictions should be imposed on Chinese workers that apply to companies in Israel. , Which employ foreign workers.
"We are required to pay the minimum wage, pension provisions and social conditions. The Chinese companies employ the workers on the terms of China. In addition, the Chinese government gives unlimited credit to those companies. If you want to create competition then you need to create equal conditions. All in all, we wanted to apply the blue-and-white preference that currently exists in other tenders: if the Israeli bid is no more than 15%, the Israeli will win. We have proposed to apply this to performance tenders as well.
It should also be remembered that Bennett received a very clear warning against the employment of Chinese companies.
This fact indicates a tendency to keep the knowledge and money here.
We asked for this balance, which is also not a categorical decision, but a balanced decision that takes all aspects of the market into account. "
Construction in the south / Photo: Dudu Greenspan,
"One third of tenants in rent"
Talk about a housing crisis. There was a crisis in the mid-1990s, when there were no apartments to house the immigrants. Now there is a crisis, or just high prices?
"Yes, there is a crisis. There is a difference between needs and demand. We in the association say that there is a shortage of 150,000 apartments, according to the Ministry of Housing's eligibility data - couples and individuals who do not have an apartment and want and can buy, otherwise they would not apply for an eligibility certificate. "There are single people living in old age with their parents and even such couples. Long-term rentals also meet this demand, so this supply must also be increased. It should be understood that if this shortage continues and apartment prices continue to rise, this will lead to much more severe protests than in 2011." .
Sorry for the cynicism, but what do contractors care about this crisis? The public buys everything you build at high prices, you do not lose from it.
"Some contractors turn to me and say, 'Why are you helping to lower apartment prices?' But they are usually small contractors who think in the short term. We do not really benefit from this situation. Look at the recently published tenders: A tender in Beit Shemesh closes at NIS 850,000. Per housing unit; only four years ago it was the price of the apartment there.
"In Be'er Ya'akov, a tender for a land cost of NIS 1.2 million per housing unit was closed; In Netanya, a tender for NIS 1.6 million per unit was closed, in Neve Gan in Ramat Hasharon in the western part of Kiryat Shaul, a closing of NIS 2.3 million per unit and in Sde Dov NIS 3 million per unit.
"Contractors use profit from projects to buy land for the next project. Profit fails to catch up and is not enough to buy land. Therefore developers need loans and this is a risk to the industry - risk of bankruptcy. Entrepreneurs buy expensively, and if and when market conditions change they will be exposed to bankruptcy.
" Banks are also taking greater risk in the industry today. They offer higher funding than before, and the high funding rate is another reason for the price increases. We need to understand that prices are rising along with the level of risk, which is why we are working together with the government to lower housing prices. "
In the meantime, everything seems to be leading to further price increases. What might moderate them?
"The government has proposed several moves that may support changing the trend. Minister Ayelet Shaked has proposed an alternative to urban renewal programs that may be more effective. Extending the Hotamal law, along with allocating half a billion shekels to encourage urban renewal authorities, can also encourage supply.
"In addition, regulatory measures proposed in the Arrangements Law, such as self-licensing, will make it possible to issue a building permit within six months. If all these things materialize in addition to RMI releasing more land, it could lead to price moderation. It all depends at the moment on the Knesset of Israel.
"It will probably be difficult for the government to pass everything it wants in the Knesset. But I hope the Knesset will see the public good more than the lobby of local authorities, such as Forum 15 and the local government, who want to stop it. I hope they will not torpedo these proposals. I am active in the association. It has been almost 30 years and this is the first time I have defended the Arrangements Law, because it has no measures against the market. "
If so, maybe you should wait and not buy apartments now?
"I always tell those who need an apartment - to buy now. This is of course true for those who have equity that meets the conditions of the banks (30%, except in cases where an equity of 10% of the value of the apartment is sufficient) and provided he expects to meet mortgage repayments .
"In Israel, only a third of the tenants live in rented accommodation, and two-thirds in an apartment owned by them. In developed countries, 40% live in rented accommodation, because there is a long-term rental option. If there is a supply of long-term rental apartments "This is the direction of the 'apartment for rent' program - to create 15,000 long-term rental apartments a year, but that is not happening."
Trend change.
Shaked / Photo: Amit Shabi,
"50 months for a permit in Ramat Gan"
Israel is ranked very low in the world in the World Bank Index, in the sections "Real Estate Licensing" and "Real Estate Registration". To what extent does this affect prices?
"Regulation and bureaucracy in Israel affect apartment prices by hundreds of thousands of shekels. It takes an average of 30 months to issue a building permit; this is after there is a suitable master plan for construction. A master plan change lasts at least seven years. In the Ramat Gan, for example, the time for issuing a permit is 50 months. These are costs to the entrepreneur of dealing with the bureaucracy and financing costs, all of which are passed on to the consumer.
"Regulation in Israel is stricter in many areas and does not take into account its effect on the price to the consumer. Fire safety, for example, is one of the strictest in the world - it has costs. In Israel the regulator dictates the level of finish and does not allow selling a lower standard. "When you come to buy a car, you are offered several models and you can choose according to the price you are willing to pay, apartments do not allow us to build in simpler and cheaper specifications."
Infinity on the Sea of Galilee
We are doing the interview for "Israel of the Week" on the roof of the Sofia Hotel, which was recently inaugurated over the azure shore of the Sea of Galilee and in the view of the Golan Heights.
"In 2014, my father offered to buy this building, which served as the soldier's house in Tiberias until 1984. The truth is that my sister and I opposed it. It is a building from the Ottoman period that served as a transit station for those coming from Syria. "She moved here, so my father had a sentiment for the place."
Raoul is not a Syrian name.
"True. My grandparents, like many Jews, fled from Syria in the 1920s to Argentina. That's where I was born. I immigrated to Israel at the age of 3. For most of my adulthood, I could not return there because I was considered a deserter."
Your father founded Reuven Srugo, a private construction company, and you are building luxury projects in the center of the country. What about you and the hotels?
"First of all, we have had the Vista Hotel in Eilat for 25 years. It is a great 4-star hotel, with 84 rooms. In 2014, my late father offered us, his four children - me, Itzik, Yoav and Sophie - to buy the building in Tiberias , Which until 1984 served as the soldier's house in the city and was originally an Ottoman structure that served as a transit station for those coming from Syria.
"My father had sentiments for the place, because his mother, Sofia, moved there when she came to Israel from Syria. At first my sister and I objected, we thought it was an expensive venture for a faltering city. But we were convinced that hotels should be developed. Which are expected to be the most profitable in the coming years. In fact, hotels can be seen as a type of income-producing real estate. I believe that in the near future we will also inaugurate hotels in Tel Aviv, Jerusalem, the Dead Sea and the north.When we reach a chain of eight hotels, we will stop. "
You opened in Corona. Did not regret this investment?
"Until the outbreak of the corona seen a nice increase in tourism to Israel. Before corona We have already reached to 4.5 million tourists and we appreciate Israel's tourism potential is 10 million. So yes, corona stuck plans. We opened and closed after three days following a change in the instructions.
" The problem is that It is possible to close a hotel - the water must flow, the hotel must be maintained, the air conditioning must be turned on. And since we opened this year then we were also not eligible for Corona grants, so we lost a lot of money. The guest mix of this hotel should also include foreign tourism, and it is not clear when the tourists will return to Israel. "
In the meantime, we are paying dearly for vacations in Israel.
" We have invested NIS 150 million in the hotel. Our costs are high. We pay NIS 700,000 a month in property taxes, employ a security team of five people, a kosher system. Still, our prices are not high relative to a 5-star hotel. "
Tiberias has not been developing for decades. Are you sure this investment will justify itself?
"The Sea of Galilee is no less beautiful than Lake Garda in Italy, or Lake Tahoe in San Francisco. The Sofia Hotel is uniquely built, has a story behind it. We built the pool in line with the Sea of Galilee, so when you swim you see the Sea of Galilee as a continuous continuation of the pool. Gray so that the color of the pool water will be similar to the Sea of Galilee. We built a wine cellar and a roof. We kept the original building design. It is important for me to note that the hotel was designed by Levin Packer Architects and Fagin Architects. "More hotels are being invested, such as Stay and the renewed Kinneret waves - private entrepreneurs are leading a change in approach to the city. I believe this will happen, the city will rise and the huge investments will justify themselves."