Real estate is collapsing (Shutterstock photo)
The Knesset’s Research and Information Center presented the report describing and analyzing the implementation of apartment subsidy programs in Israel over the past decade. The document presents data on the housing market, budget data for government programs to subsidize residential apartments, various estimates for discounts on apartment prices, and an analysis of the implementation of the programs.
In the years 2015-2022, the price index for owned apartments increased by 47.8%, the average salary index for a salaried position increased by 26.6%, and the rent index increased by 10.7%. In the years 2017-2022, the price index for new apartments increased by 26.1%, it should be noted that in In 2022 alone, the index of new apartments increased by 21%.
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There is a correlation between a high weight of apartments as a discount to the total number of new apartments and a low increase in the apartment price index; The weight of discounted apartments in the total number of new apartments sold was in 2019 at a peak – 41.3% and in 2021 at a low – 21.8%. In the months of July-December 2022, the change in the price index for new apartments excluding apartments at a discount is lower compared to the change in the index for new apartments that includes apartments at a discount. Two possible explanations for this are: dwell time – the period of time that passes between the holding of the RAMI auction in which the price of the apartment is determined, and the sale The apartment by the contractor to the beneficiaries is usually several months to several years, and during this time the value of the apartment has increased as well as the appraiser’s assessment – according to the RMI Council, the appraiser’s assessment is determined once a year, so an increase in apartment prices after the date of the appraiser’s assessment is not necessarily taken into account in the appraiser’s assessment.
In the target price program, which operates as of March 2023, there are several differences compared to the previous programs, most notably the discount rate which is limited to 20% of the price of the apartment and under certain conditions the maximum discount for the buyer can reach up to NIS 500,000. In the years 2016-2022, 71,910 subsidized apartments were sold to buyers according to the various programs. In the years 2015-2021, the total land value discounts given was approximately NIS 8.1 billion. The total commitments for subsidizing land development was NIS 1.4 billion; And total commitments for grants to buyers was about NIS 1.3 billion; And in total about NIS 10.9 billion.
The conclusions reached were that apartment subsidy programs did not lead to a significant decrease in the apartment price index. Moreover, during periods of decreases in the new apartment price index, such as in the months of September-December 2022, the change in the new apartment price index excluding discounted apartments is lower compared to new apartments including discounted apartments. The discount for those entitled to purchase an apartment under the programs is regressive. In the center, the discount reached hundreds of thousands of NIS, mainly for buyers in households from high income deciles who have the ability to purchase an apartment at a high price. In the periphery, the discount is relatively low, mainly for households in low income deciles. Therefore, the program led to an increase in the capital gap in Israel.
It was also found that the discount in the program is regressive. In the central cities, the discount reached hundreds of thousands of NIS, mainly for buyers in households from high income deciles who have the ability to purchase an apartment at a relatively high price. In peripheral cities, the discount is relatively low, mainly for households in low income deciles. Therefore, it seems that the program led to an increase in the gap in the distribution of capital in Israel From the data presented, it appears that the weight of the winners in Arab communities was significantly lower than their weight in the population, data that indicate inequality in the distribution of aid within the program.
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