The housing cabinet unanimously approved the construction of 150,000 rental apartments at its first meeting yesterday.
"Lowering housing prices is one of the government's great tests," said Minister of Finance Yair Lapid. "We have a housing emergency, which threatens an entire generation of young people who are afraid to go out into the world if they don’t have a home. All the participants in this meeting are committed to finding a solution to the issue and achieving its goals."
"The housing cabinet has two pillars, which are one," added Lapid. "The first is the government's housing plan, which aims to remove bureaucratic obstacles and improve inter-ministry coordination to boost the pace of housing starts. In addition, there will be a national program to build 150,000 long-term rental apartments, which will be built over ten years. Similar projects in other countries have demonstrated their ability to change the reality in housing markets."
Lapid said that a quarter of the apartments in the program will be slated for preferred professions, such as teachers, police officers, and nurses, and for public housing. "There is a good social element in a police officer living next to people he protects, and in a teacher living next to his pupils."
Investment institutions are unimpressed by the housing cabinet's plans. A top source at an institution said, "Will institutions invest in rental apartments? No. It's impossible to increase the institution's investment risk for a return of less than 5%, when the alternatives are better. I don’t think that this plan is attractive enough."
The source added, "Our first goal as an institution is the best investment of savers' money, in terms of the risk-return ratio. Investment in real estate should be a low-risk investment for the return to interest us. That's why the state should find a way to work with the institutions and provide certain guarantees, and not on the operational side. The idea is right, because it's a shame for us to allocate our money on foreign housing projects; we'd rather invest here. But the level of risk in this investment should be adjusted so that the expected return from it is worthwhile. That is not yet the case."
Another source told "Globes", "Investment in rental apartment projects is a very suitable business for institutions, and we'd be happy to share in it. But the prevailing market conditions in Israel, in which the ratio between the apartments' value and the rent gives a return of less than 4%, does not justify our participation in such projects."
Published by Globes [online], Israel business news - www.globes-online.com - on May 23, 2013
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