Lapid to contractors: Sell now, prices will drop

Finance Minister Yair Lapid rebuffed criticism of his zero VAT plan.

Minister of Finance Yair Lapid today rebuffed criticism of his zero VAT plan, saying that it will not boost demand for apartments, because demand is rigid. Speaking at the "Calcalist" conference, Lapid also called on contractors to lower prices now before "prices fall even further."

"Since the zero VAT plan was published, the claim that it will boost demand has been heard again and again. You are artificially lowering prices, which will send more young couples to buy apartments. This claim does not hold water in the real world. Housing demand in Israel has been inflexible for a long time; it is completely rigid. Is there one young couple in Israel - one! - who has enough equity to buy a home, and does not do so? Is there one such couple who has succeeded in overcoming the mortgage obstacle course and then said, 'I won't buy an apartment, I'll invest the money in the stock market, or I'll put it in a savings plan'? Of course not. They went and bought an apartment," said Lapid at a real estate conference in Tel Aviv.

Lapid said that homebuyers in recent years made a bad deal and undoubtedly feel cheated by the government. "They went and bought an apartment in the full knowledge that they were making a bad deal. They knew that they were paying too much - on a per salary basis, the most expensive in the West - not in a location that they wanted, not under the terms they wanted, and worst of all, they felt, justifiably, that they were cheated by their government. They hated every moment, that is why they went out on to the streets in the summer of 2011, but they continued to buy the wrong homes at the wrong prices," he said.

Lapid called on contractors to lower prices. "If contractors know and believe that this time the government is serious, they have a clear interest in lowering prices now, both because the market has screeched to a halt and they are liable to get stuck with apartments they have already built and with payments to the banks, and because programs such as the target price and taxes on apartments for investment will lower prices further. This is the new equation: it is worthwhile for buyers to wait, because prices will fall. It is worthwhile for contractors to offer discounts, before prices fall further. And I tell the contractors, sell, because prices in 2015 will be lower than in 2014. Sell, because we are serious."

Published by Globes [online], Israel business news - www.globes-online.com - on April 8, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

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