Will owners of vacant and empty land soon have to pay property tax? Such a proposal will come up today as part of a special discussion that the government will hold today (Sunday) regarding the real estate crisis, the goal of which is to get Israel out of the crisis that has accompanied it in recent months.
must hurry. Plow construction (Shlomi Yosef)
The taxation of empty land is not the main thing, it is only one of the issues that will come up, but it shows how much the government must use the tools it has to increase the supply in the market. In this case, the purpose of imposing such a tax stems from the fact that the government does not want vacant land to remain, but to increase the supply. She understands that although the demand was at a low, the supply was low and therefore the prices of the apartments that fell remained high. It is important to note that in many cases also tax considerations for the decision to leave land that is not used for agriculture but for residences, empty and vacant. The government will have to find a solution for those land owners, who will leave clearings here and there – payment of property tax when the land is vacant or payment of a high tax in the case of a dealer who needs to wait a certain period until construction in order to avoid paying tax, which can sometimes reach hundreds of thousands of shekels.
The team to deal with the real estate crisis includes, among others, the chief economist at the Ministry of Finance, Dr. Shmuel Abramson, but also senior officials of the Tax Authority, the director general of the Ministry of Housing, the legal advisor to the government, and more. Among other things, the team will discuss increasing the quota of foreign workers. This happened a little Too late, after the contractors warned at the beginning of the war that such a team should be formed and today, almost four months after the start of the war, only a few thousand have arrived here. In addition, the government wants to approve subsidizing the development costs of plots in the periphery, including urban renewal. If this happens, the real estate industry Could get a shot of energy.
The total cost of the program reaches NIS 2 billion and includes grants of approximately NIS 1 billion for the development of lots in peripheral areas and almost another half a billion NIS to subsidize urban renewal projects. According to the numbers, it can be seen that the main goal of the government is to significantly increase the supply in order to ensure that real estate prices do not rise, which is expected to happen in the current situation in light of the forecast for the outbreak of occupied demand.
How will the money be distributed? Regarding the subsidy for land development costs, it is a subsidy of up to NIS 50,000 per apartment, mainly in national priority areas. How does it affect? When a contractor builds a building with 60 apartments and receives NIS 3 million, it is estimated that the chances of him going to tender are higher because his entrepreneurial profit increases. This grant will be given through the development cost for the lots. Today, many contractors avoid going to tender even when the land is at zero price, because they know that the development price is high and significantly increases the cost of the apartment. The government wants to condition the subsidy and rightly so – the localities that will receive a grant will have to prove that they are gradually increasing the supply over the next three years and in addition – that the cost of development is becoming more expensive due to topographical conditions.
Meanwhile, just a drop in the ocean. Foreign worker (Shlomi Yosef)
In addition, the government will allow deferred payments for winnings in RMI tenders. They believe that more contractors will enter the tenders if they know that they can purchase now and pay in the summer, when by then the interest rate is expected to drop shortly and perhaps make it easier for them.
And what about long-term rental? Here the government is not doing enough. It will work so that entrepreneurial companies can deduct VAT from payments to build such a project, which allows them to save 17%. Today, the developer sells the apartments and pays VAT, so many of them claim that there is no economic viability, certainly not with the high interest rates in the economy.
Regarding urban renewal, as mentioned, about half a billion shekels will be allocated to subsidize projects. Urban renewal is indeed in the process of growth, but from this year’s data it can be seen that fewer companies are building than in 2022. Some projects do not have economic feasibility and a subsidy can help in this matter. To encourage the local planning commissions to approve projects quickly, the government will allocate grants to those who issue permits this year at the rate of hundreds of apartments. Also in this context, clear parameters will be established.
The rest of the money is earmarked for increasing the number of foreign workers. For now these are just numbers. Before the war there were about 80 thousand Palestinian workers in Israel, but now they are not allowed to come to Israel and the solution is to increase the number of foreign workers. As you know, last week a small delegation arrived in Israel and by the end of February the government hopes that about 10,000 foreign workers will arrive – a significant number, but it still does not come close to the number of workers before the war. It should be taken into account that there is also a long training process here. Not all employees are skilled and absorption also takes time. According to the contractors, foreign manpower companies recently entered the picture and “imported” workers here at significantly higher prices. The companies cut a coupon and the daily price increased by about 20% in the best case and in extreme cases even by 50%.
Part of the government’s solution is the Palestinian workers. At the beginning of the war, he encountered resistance, but most contractors understand that the differences in the salary expense items can reach tens of percent.
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