In an interview on Channel 10 this morning, Eran Nitzan, deputy budget director in the Ministry of Finance with special responsibility for real estate, spoke about the ministry's activity in the housing market. Asked about Minister of Finance Yair Lapid's insistence on his 0% VAT program for first-time homebuyers, and the opposition of senior Finance Ministry and Bank of Israel officials to the plan, Nitzan said, "We live in a democratic regime. There are ministers, and they have the authority to decide. Of course it's appropriate for them to listen to the opinions of the professional officials."
So what's your view?
"We say exactly what the minister of finance is saying, which is that the long-term solution lies in expanding supply. For example, the Finance Ministry and the Ministry of Transport have formulated a long-term agreement on constructing roads and interchanges that solves a lot of problems. We are doing many more things to speed up processes and make home construction easier."
Construction of how many homes?
"Israel is short of about 100,000 housing units, and we are taking steps to narrow this gap. A home is not like a tomato, and it takes time to build apartments. We are very, very concerned at the rise in housing prices, because it makes whole families slaves to mortgages. So we are doing everything we can to expand supply."
Why should contractors want to build apartments if the land is costly for them?
"Of course when apartment prices fall and supply grows, the contractors will make their calculations. And of course when apartment prices fall, the price of land will fall as well. The Israel Land Administration has created a different model, a new model, what is called 'target price'. It's complicated, but we are working on all fronts. In the end, when all the relevant agencies speak the same language, this has an effect. We are pouring billions into this area, and in the end that will halt the rise in prices, and even bring them down."
When will home prices fall?
"The goal is to halt the rise in 2014, and to start bringing prices down in 2015. There are those who fear that the action we are taking is too aggressive, but I'm not committing to a precise date. I do believe that, in the medium-term, prices will fall."
Do you own an apartment?
"I have an apartment. I'm not cut off from what people are coping with. We feel the same pain as everyone else. The rise in home prices is causing huge damage to the economy, which is why we are acting."
So you're optimistic?
"In government you have to be optimistic, so we will be."
Published by Globes [online], Israel business news - www.globes-online.com - on September 21, 2014
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