Nissim Bublil does not need to engage in complex economic calculations to evaluate whether the latest government moves will lower housing prices. The only thing the head of the Israel Builders Association is asking is whether the steps will increase the supply of homes.
His answer to this question also shows that he views some of the government’s proposals as positive, in fact most of them – but that what really matters is implementation. And even if the implementation meets expectations, the first results of these steps will only start to be felt in three years’ time or more. The problem is that, for now, all the plans are vague, he believes. “And even the plans that seem the most concrete do not provide details, and they are not clear to either the developers or the public – and of course no one knows when they will happen. In other words, we are back to the question of implementation.”
It would seem that quite a lot has changed in how the government relates to the real estate market. There is a surfeit of plans and programs, but, on the other hand, nothing dramatic has happened yet. How do you see things?
“I always said that the test for the government would be implementation, since in the end you have to build homes so people can live in them. Spin and declarations do not build homes. Some of the failures in the market are fundamental – starting with Master Plan 35 that does not take into account such high natural growth and limited construction in the center [of the country], and that is just one example. As long as they don’t deal with the basic failures, we will not see dramatic changes.”
But the housing market cannot change by magic. Maybe the public doesn’t have patience?
“Every year they say it is impossible to [work magic], but if they would have done it three years ago, maybe we would now be at the beginning of the way out of the situation in which we find ourselves in. The question is whether the steps they are undertaking today will bear fruit in a few years, or will we once again say there is no magic [solution]. Before you say such things, you need to examine what the government is really doing.”
Take, for example, the zero VAT exemption (for young first-time buyers, up to 1.6 million shekels). What is your opinion on that?
“I see the zero VAT decision of Finance Minister Yair Lapid as being compensation for young couples for the lack of action by the previous government. Will it be done properly? That is a different question. We must set dates and make it simple, and not cause someone to be unable to receive their eligibility because of too much bureaucracy, which will make it difficult to select those eligible and select the projects. I regret that, as of now, a great deal has been left unclear surrounding this decision – first and foremost, which projects.”
Another government plan being advanced is target sale prices. What is your opinion on that?
“Here, too, they are speaking in slogans and no one knows what exactly it is. When we know, I can speak about it at length. Until now, from the things we have heard, I am not sure it is the ideal solution, since the Housing and Construction Ministry presents the plan as a solution for places where it is possible to sell thousands of housing units – something that will allow this to have an impact on reducing housing prices in the entire regional market. I don’t see that [happening] in areas of high demand. But in the outlying areas, by comparison – where land prices are low – the plan cannot lower prices significantly.”
In light of the lack of clarity you’re talking about, the real-estate market is entering a waiting period in which people are hesitating over whether to buy homes. How do you see things?
“Uncertainty is not healthy for anyone. Immediately after the announcement of the programs, they needed to explain what were the parameters for eligibility to be included in each one of the plans, so people could understand if they meet the criteria or not; so everyone could understand what is happening. They didn’t do that, so now everyone is waiting. As for developers, they are not starting new construction and are delaying building starts. The banks are not approving projects since, in the situation that was created, there are no early sales as the banks want there to be.
“We will see a significant drop in building starts - which is just the opposite of what the country needs. I still don’t have figures as to the extent of the drop in the past few months since the plans were announced, but it all depends on how long they delay the decisions. In my estimation [the delay] could last eight months. If that does happen we will see a drop of some 25% in building starts, which will occur mostly in the projects consisting of apartments priced to reach 1.7 to 1.8 million shekels. Those are the ones which are still relevant for the zero VAT plan, which is meant to include apartments of up to 1.6 million shekels. At prices of more than 1.8 million shekels the contractors know they will not be able to lower [their prices] to 1.6 million as is required by the plan, and so they will continue to work normally.”
How do you see the umbrella agreements between the government and the local authorities for building homes?
“It is a very important step to remove barriers and put a large amount of apartments on the market. It is a very positive step which will show results in another three to four years. The problem is that most of the places involved are not in the core [areas] of demand.”
The government is presenting Kiryat Gat and Kiryat Bialik —two of the places where the agreements were signed —as high-demand areas.
“I would be happy to agree that Kiryat Gat and even more distant areas are high-demand areas. But as long as the education, health and cultural services provided there are not identical to those in the central region, the public is voting with its feet and does not view Kiryat Gat as an area of high demand.”
You accused mayors of not wanting young couples in their cities.
“True. A young population creates expenses. I was in a meeting with a mayor from the center [of the country] who said openly that every young couple is a 7,000 shekel loss every year for the city.”