Treasury chief blames BoI for home price rises

Finance Ministry director general Doron Cohen said his words were taken out of context and admits lack of supply is also to blame.

"The Bank of Israel's low interest rate policies have directly caused the rise in home prices in recent years," Ministry of Finance director general Doron Cohen told students last night at the Or Yehuda Academic Center. The Institute's spokesman reported these words today in a press release.

Talking to "Globes" today Cohen insisted that his words had been taken out of context and that he supports the monetary policies implemented by the Bank of Israel and its Governor Prof. Stanley Fischer. He said, "There is no doubt that there is a link between the level of interest and the price of apartments - but the high growth target and creating jobs are more important than apartment prices. Growth is the main target and more important."

Cohen added, "In the long term, the reason apartment prices are high is the low supply and the way for the government to deal with the problem is by increasing the pace of planning and marketing of government land. The country needs 30,000 apartments and in 2012 the planning target was 60,000 of which 40,000 were in the center of the country. This was much higher than in previous years not to mention that in some of the years marketing in the center of the country amounted to zero."

He said, "To our regret the amount of time between planning and marketing takes two to three years and that's how long it will take to close the gap. Increasing the rate of planning and marketing will minimize the housing problem."

Encouraging Building in the Center

The spokesman of the Or Yehuda Academic Learning Center reported that Cohen said, "The Finance Ministry is changing its policy of releasing land for building. In the past we were more encouraging of building in the periphery but today we encourage construction in the center. This is a measure that will moderate apartment prices in the near future."

Over the past few months, the Finance Ministry and Bank of Israel have been arguing over who is responsible for high apartment prices. The Bank of Israel thinks that the lack of supply is the main problem and they point out that the Supervisor of Banks has imposed restrictions on mortgages to restrain demand.

However, senior Finance Ministry officials claim behind closed doors that the low interest rate is one of the main reasons for high apartment prices.

Published by Globes [online], Israel business news - www.globes-online.com - on January 14, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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