Yones: Land Administration is biggest profiteer

Mizrahi Tefahot Bank CEO Eli Yones: The ILA is a monopoly selling the little land that it has at inflated prices.

"The Israel Land Administration, Israel's biggest land profiteer, is an unrivaled monopoly, enabling it sell the little that it has, bit by bit, at inflated prices, at the highest possible price margins," said Mizrahi Tefahot Bank (TASE:MZTF) CEO Eli Yones at the "Globes" Real Estate Summit in Tel Aviv today.

"Taxes can be cut. It's possible to hand over land for free or almost nothing. There's a lot of land in the north, in the south, and in the center of the country. This can be done, but someone has to agree to forego this revenue. We have a humongous deficit, and someone has to finance the annual budget. The Ministry of Finance has to find a different way to close the gap," said Yones.

Yones denied that there were any problems in the mortgage market, in which Mizrahi Tefahot Bank is the biggest lender. "There is plenty of financing. There is money in the foreseeable future, and no restrictions on capital by any bank. There are no credit restrictions on real estate in Israel, at any bank, and there is definitely no problem in mortgages. The level of risk in mortgages is very low, and we're all happy to extend credit. Even the IMF says so."

Yones cautioned, "We face a very heavy macroeconomic weight, which affects the general mood of policy-makers in the Israeli economy. There was a crisis in Europe and in the US, and demand for our products was hit. One of the tools for spurring growth is to cut the interest rate, but this encourages investment, including in real estate. The result is upward pressure on prices.

"The interest rate encourages purchases of real estate, and will continue to do so. Raising the interest rate now is out of the question, because this would contravene stimulating continued economic growth. Moreover, if we raise the interest rate, we'd bring more and more investors into the Israeli market, who would buy more and more, strengthen the shekel, continuing to harm the growth engine of the economy. This is a downward spiral. The Bank of Israel is stuck in this regard."

Commenting of Minister of Finance Yair Lapid's idea to deal with the housing shortage by rental projects financed by investment institutions instead of the banks, Yones said, "There are great ideas for the construction of rental apartments financed by pension funds and would be cheaper than buying a home. Why? Does anyone thing that the interest rate on rent will be lower than the interest rate on mortgages? No. Someone will have to subsidize, and forego this income, which will worsen the deficit.

"There are alternatives, alternative taxes, such as raise the capital gains tax, raising the companies tax, or dealing with distortions related to strong unions, and so forth. But the main source for closing the deficit is the budget and its priorities. It's impossible to talk about far-reaching reforms in construction without deal with the question where will the money go, and what will it be used for? Will it be used to encourage sloth, or savings and work?"

Published by Globes [online], Israel business news - www.globes-online.com - on April 9, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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