Finance Minister Yair Lapid’s departure means that his flagship plan to exempt some first-time home buyers from VAT is being shelved, possibly permanently, to the great dismay of some would-be buyers who had been waiting for the plan to take effect.
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Lapid was fired by Prime Minister Benjamin Netanyahu this week as the latter disbanded the coalition and called for an early election. Lapid bid his ministry goodbye yesterday at a ceremony in Jerusalem, after 20 months on the job.
At the ceremony, Lapid emphasized the ministry’s importance to the well-being and financial security of Israelis, and cautioned against making appointments at the ministry based on political rather than professional considerations.
Finance Ministry Director General Yael Andorn bid Lapid farewell on behalf of the ministry employees, stating that ministry discussions under Lapid had been serious and thorough and that Lapid challenged the staff to think outside the box due to his occasional rejection of economic dogma.
Lapid announced the zero-VAT bill in March and had staked his last several months on advancing this plan to exempt some first-time home buyers from VAT on new apartments from developers, up to a price of 1.6 million shekels. Lapid had heralded that plan as a way of helping younger families cope with skyrocketing housing prices. But it drew broad fire from economists and other financial professionals, who said that instead of helping young families it would further boost home prices while costing the state billions.
Another plan to aid buyers, the so-called “target price” plan, is being advanced by the Housing and Construction Ministry. That plan involves selling land at a discount to contractors who agree to sell apartments at 20% off their market price. That plan was scaled back in order to work in tandem with Lapid’s zero-VAT bill.
After Netanyahu disbanded the coalition and it became clear that Lapid’s bill was being shelved, the Housing and Construction Ministry said it intended to go forward with its plan and to begin issuing tenders for contractors. But yesterday the treasury’s legal advisor said he saw no pressing reason to separate the two plans, and sent the attorney general an opinion on the matter.
The Israel Lands Administration is scheduled to meet next week to vote on separating the plans. The cabinet had decided this summer to start issuing tenders for target price projects only after the zero-VAT bill was passed.
Finance Ministry legal advisor Joel Baris said such a move would be a major chance in policy, and that advancing target-price tenders would impose a major financial restraint on the next government. The target price plan is likely to cost upward of 5 billion shekels, he stated.
These plans to reduce home prices for some buyers were credited with cooling off the real estate market over the past several months, pushing down the number of transactions as would-be buyers sat on the fence, hoping that the plans would be put into place.
This week, would-be buyers expressed disappointment as their hopes for relief faded.
“It’s like a failed attempt to have a child,” said Eyal Meri, 34, who with his wife has been hoping to buy an apartment for the past two years. “This bill gave hope, and we were counting on it. I really believed the bill would pass, and I checked on its progress every day.”
Meri and his wife, who are hoping to buy a home in Netanya, said the bill would have made the apartments they’re looking at some 250,000 shekels cheaper.
Another would-be buyer, Hananiel, lives with his wife in Beit Dagan. They haven’t bought a home in the two years that they’ve been married because every time they started looking, a new proposal to cut housing prices popped up, he said. They weren’t convinced that the zero-VAT bill would pass, but they thought that it was worth waiting on the off chance that it would, he said.
But now they’re negotiating to buy a secondhand apartment, he said. “In retrospect, we shouldn’t have waited,” he said.