The firm of Ze’ev & Erez Cohen Certified Adjusters reports the legislative foot-dragging during the last eight months surrounding the Zero Value Added Tax Bill will have harsh repercussions for younger generation in Israel.
Erez Cohen explains that the probe conducted by the company reveals that back in the 1980s and 1990s, when there was still construction in the public housing sector, 84% of persons eligible for housing received an apartment. The cost of such an apartment then was 400,000 shekels but in today’s financial terms. the same apartment would cost 1.5 million shekels, almost four times the price.
Erez adds that even if one takes the increase in the standard of living and salaries into consideration, the price of the apartment has risen about 2.5 fold. The report states that only 47% of eligible persons are capable of buying an apartment today and this includes many receiving assistance from parents. Of the 47%, about half would be compelled to compromise the location for an affordable price, which includes moving away from parents, family, schools, and the workplace. In other words, only 24% of eligible citizens would be able to buy an apartment today without compromising on the location.
As a result, the percent of available apartments that are owned lessens with each passing year from 74% in the 1990s to 64% today. That number is expected to continue dropping, albeit faster than in the past, particularly regarding couple up to the age of 35. The report predicts that by 2020, only 59% of eligible buyers will own an apartment.
The report adds that the Zero VAT Bill in recent months has resulted in 3%-to-6% price hikes in apartments during recent months which amounts to 80,000 shekels more for an average apartment. Cohen sites that not only doesn’t the bill assist the housing market, it has made things considerably worse. It is added at best the bill will only effect about 10% of the buyers since many will not meet eligibility requirements while others are uninterested in accepting the terms of a Zero VAT plan.
Mr. Erez Cohen adds “Therefore, I am calling on the prime minister, who is an adult, to calm the Liebermania and Lapidmania which will only serve to send more of our young to live in Germany. They must stop the fiasco called Zero VAT once and for all and instead, to implement a strategic national program that is premised on four major points;
(1) removing the market managing of land from the Prime Minister’s Office to advance accelerated marketing and promotion to offer discounted prices while there is a massive freeing up of land zoned for construction,
(2) Significantly curtailing the process to obtain required permits, which will result in an immediate potential increase in starts of building projects from today’s 40,000 to 55,000,
(3) A national broad encompassing program to expedite site removal and building to reach 450,000 apartments in a target area, which will increase annual potential to 65,000 units and this will lead to a balance between availability and demand within five-to-six years,
(4) The immediate reduction of unnecessary taxes levied on contractors and a radical increase in the number of available foreign construction workers to industrialize the construction industry, a move that will result in reducing construction time and this will lead to a minimum of a 25% reduction in the cost of apartments.
“The last point is I call on the State Comptroller’s Office to launch a comprehensive probe into the causes of the national failure that led to doubling the price of apartments in the past decade. I am pained but this is not a Heavenly decree but those responsible must be held accountable, at the very least on the public and political levels”.
(YWN – Israel Desk, Jerusalem)
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One Response
In a world of stable or deflating prices, home ownership isn’t quite so important. Increasing rental units would be nice, and for many frum people it would be preferable. Indeed, in a deflationary environment, home ownership means the mortgages keeps getting larger in “real” money.
Israel might have inflation in the future since unlike Amreica and Europe, Israel’s population is growing (zero population growth is very deflationary). However at present, Israel has stable price indicies and most of its trading partners have deflation.