On March 24, the housing cabinet approved a number of proposals aimed at lowering home prices, including zero VAT on first-time homebuyers of new apartments (provided they meet certain criteria), and target price housing tenders (in which apartments will be sold at a 20% discount on the market price, which is the median price per square meter set by the government assessor).
"We assess that until legislation on the various housing plans is passed by the Knesset and becomes law, especially the zero VAT plan, monthly home sales, especially of new homes, will continue to fall, possibly very sharply in the short term, mainly because people eligible for the housing plan criteria will postpone purchases," says Bank Leumi in its weekly macroeconomic review.
Bank Leumi says that this development is liable to affect the flow of orders in the short term to developers, contractors, and building suppliers in the market relevant to the eligible buyers in the various plans.
In the longer term, mainly after the plans are approved, Bank Leumi says, "If the government's plans are implemented and meet investors' expectations, and prices of apartments for eligible buyers include a 'discount', we expect that sales will pick up, especially as the demand gaps, which opened in the short term, are closed and the public seeks to 'exploit' the discounts and bring forward purchases."
If the fall in housing inventory continues, following implementation of the various housing plans, and the increase in housing starts does not continue, home prices will again rise. Therefore, a necessary condition for the success of the government's various housing plans is to increase the supply, says Bank Leumi.
Published by Globes [online], Israel business news - www.globes-online.com - on April 3, 2014
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