MK Carmel Shama (Likud) has approached Minister of Finance Yuval Steinitz and Minister of Housing and Construction Ariel Atias with a proposal, which he claims will immediately slash housing prices.
Shama proposes issuing bonds linked to housing prices as an alternative to buying an apartment for investment. He believes that his proposal will increase the supply of apartments in the market and lower prices, because housing prices are set by supply and demand.
Shama's objective is to create an infrastructure of financial instruments that mimic investment in residential property in order to partly sate investors' appetite for investment, which will ease demand for non-financial investment in housing, and make the housing market more sophisticated in the long term.
Issuing home price-linked bonds will enable the public to buy a bond as an alternative to investing in an apartment or to protect money intended to buy an apartment in the future, without the need to rush out and buy an apartment before prices rise.
Shama believes that rising housing prices in the past several years have been a burden and a threat on the economy at the macro level, as well as on households at the micro level. "One of the reasons for the rise in prices is the public's huge and growing appetite for investing in residential real estate, combined with a herd instinct and fear that the market will continue to rise despite all efforts," he said.
Published by Globes [online], Israel business news - www.globes-online.com - on January 20, 2010
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