Minister of Housing and Construction Uri Ariel opposes Minister of Finance Yair Lapid's proposal last week for zero VAT for buyers of a first new home. Ahead of tomorrow's housing cabinet meeting, the Ministry of Housing released a statement, in which Ariel warns that the proposal will offer only a partial solution to the need to lower home prices.
The Ministry of Housing states that to bring down home prices in general, including prices for second-hand homes, which account for 75% of home purchases, the model should be applied to a much larger proportion of transactions each year. "First-time homebuyers account for just 8% of all transactions each year, and the restrictions in the proposal, such as the requirements of military service, age, and at least one working parent further reduce the transactions as a proportion of all deals, further limiting the VAT plan's effect on the housing market," says the ministry.
Ariel adds that the tax break should also be applied to buyers of bigger homes (the largest group of homebuyers in the market, accounting for 10% of purchases of new homes), as well as first-time homebuyers, who account for 8% of purchases of new homes, will create the critical mass needed to affect home prices to stem the rise in prices, and push them down.
Published by Globes [online], Israel business news - www.globes-online.com - on March 23, 2014
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