"Somebody who bought an apartment in 2009 wasn't so smart. It would have been better to have invested in the Tel Aviv 25 Index because it has earned more," Mizrahi Tefahot Bank (TASE:MZTF) CEO Eldad Fresher said this morning at the annual real estate conference organized in Tel Aviv by Ernst & Young and Steinmetz, Haring & Gurman Law Firm.
Fresher also spoke about Israel's housing problem and claimed that the mixture of the mortgage market risk and the problem of home prices is a problematic and misleading mixture.
He said, "The first thing I did when I took up my job was to visit Harish. There is a genuine government push to set up a new city of 5,000 homes out of nothing. Only what? Nobody spoke to the banks when they decided to build a new city, or a large part of the purchasing groups, or considered the issue of financing. In Harish there are three purchasing groups of at least 500 people each. Does anybody understand what it is to manage a purchasing group of 500 people that think they have bought an apartment for NIS 700,000? What ability does it require to be such a manager? What would happen to the purchasing group if the price goes up? Whoever planned a purchasing group of this size has no understanding of financing at all and doesn't take advice."
Fresher added, "We are close to being the most expensive country in the world for buying an apartment. Several years ago it took less than 100 salaries to buy an apartment and today there is no country in the world as expensive as Israel. And the question is how much do Israeli citizens pay each month for this apartment. On the one hand, the price of apartments is rising but on the other hand financing costs are falling."
He continued, "The problem is Tel Aviv where an average 4-room apartment costs NIS 2.7 million. But the further north and south you go the result is that in the north an apartment costs 30% of what it is in Tel Aviv and in the south too, and that's where the government has failed to deliver big-time. It must try to bring about a situation where people will buy apartments in the periphery and it has not done it."
Published by Globes [online], Israel business news - www.globes-online.com - on June 17, 2014
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