Governor of the Bank of Israel Prof. Stanley Fischer has advised Minister of Housing and Construction Ariel Atias to stop marketing land by the Israel Land Authority due to concern that real estate prices could collapse.
Fischer is concerned that the real estate market will be flooded with land for which there is no demand, which could lead to a sharp decline in real estate prices. In this scenario, many contractors would declare bankruptcy, harming the banks that had given them credit.
The Ministry of Housing and Construction said that it refuses to stop marketing land, but that it would focus on areas with high demand.
The Bank of Israel said, "In his conversation with the minister, the governor stressed that there is a need to market land for building quickly in order to overcome the lack of apartments, which has been one of the causes of the rise in real estate prices. However, the Bank of Israel is requesting to do so to the correct extent, to carefully examine the amount of land being marketed, and to adjust it to long-term real estate needs, as well as to ongoing market developments."
Atias will not meet the government's land marketing target, despite his prior optimistic pronouncements. The marketing of land has been halted. According to a government decision in 2008, the minister of housing is responsible for marketing land for 34,000 homes each year, including land for 26,000 homes by tender, mainly high-density building, and land for an additional 8,000 units that do not require a tender, such as expansions in agricultural communities. In 2010, the Land Authority marketed land for more than 26,000 homes through tenders, and another 9,000 without tenders. Atias boasted about this achievement and about the increase in building starts, despite the fact that the rise in demand did not slow the rise in home prices in 2010. Prices only began to fall in the second half of 2011.
A snapshot of real estate marketing towards the end of 2011: the Land Authority has marketed land for 18,500 units through tenders, 2,000 of which were shelved as a result of lack of demand, and land for 5,000 units without a tender. In other words, unless there are dramatic changes in the next few weeks, Atias is 10,000 housing units short.
Published by Globes [online], Israel business news - www.globes-online.com - on November 22, 2011
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