For the first time, the Bank of Israel recommends that the government consider new taxes to cool the housing market.
Sources inform ''Globes'' that that the Bank of Israel officials intend two main measures: the first is to extend the betterment tax exemption period for investors who sell apartments, in order to encourage sales and increase the housing supply; and the second, and especially interesting idea, is to equalize real estate taxes with taxes on other assets.
The Bank of Israel provided no details, but presumably it thinks that real estate transactions should be taxed at the same 25% rate for capital gains, instead of the current maximum rate of 7%.
"Committee members agree that the rate of increase of home prices in recent months continues to be high, and that signs of moderation of activity in the market for homes are not seen, based on updated figures. With that, it was noted that home prices have not yet been fully affected by the most recent measure of the Supervisor of Banks which requires banks to increase their capital buffers in respect of mortgages. Committee members emphasized that monetary policy is limited in its ability, on its own, to affect this market, through its effect on demand for homes. Thus, the new government will need to adopt measures to expand the supply (accelerating planning processes and increased marketing of land, primarily in areas in demand), as well as possibly to restrain demand (such as taxation measures)," state the protocols of the interest rate decision for April-May, which were published today. The statement is also an admission of failure about the measures taken by Supervisor of Banks David Zaken to date, although the committee members still say that more time is needed for the measures to take effect.
The Bank of Israel said that housing prices rose by 9% in the 12 months through January 2013, after rising 7% in the 12 months through December 2012.
Published by Globes [online], Israel business news - www.globes-online.com - on April 7, 2013
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