Housing prices and government deception


Not a day passes in Israel without significant press coverage of the housing crisis, that stubborn persistent increase in housing prices which seems detached from the overall consumer price index and immune to every attempted remedy. To say that the government is under massive and intense pressure to bring down housing prices is a gross understatement. In recent months several policies have been implemented, the most significant being the imposition of an eight percent purchase tax on investment properties. The government is also streamlining the process associated with urban renewal projects and imposing upon developers who participate in land sale tenders the obligation significantly discount a certain portion of new apartments for qualifying young couples. Each effort is intensely scrutinized and mercilessly criticized by the Israeli press.

It turns out that the Israeli government has responded to this pressure and criticism in the traditional way of the bureaucrat: they published misleading data to support the false premise that their policies are effective and successful.

From an article published today by Channel Two News: "Yesterday the Ministry of Housing published data which indicated an apparent dramatic decrease in the prices of new residential flats. In actuality it turns out that due to an increase in real estate transactions in the periphery during the quarter under review the data reflected in the price gauge is distorted and that in fact housing prices increased by a percentage point.

"The data published yesterday presented an apparent four percent decrease in the price of apartments throughout the country, the first such decrease since 2008. . . .

"In actuality the analyzed index of both existing housing and new construction sampled 95 localities, eighty-five percent of which registered an increase in housing prices as compared to the same quarter of the previous year and sixty-four percent of which registered an increase with respect to the previous quarter of the same year.

"So how is it that the Ministry of Housing could present a picture of falling housing prices? In actuality this is due to a distortion of the data resulting from the significant growth of transactions in the periphery and by the sharp increase in prices there as a result. The fact that prices in the periphery are lower than those in the center created an impression that the average price of flats throughout the country decreased. In reality this is an artificial decrease attributable to a shift in the areas where transactions are occurring and not from a decrease in the prices of flats themselves.

"Experts explain that we have yet to see the beginning of a downward trend in housing prices and that the Housing Ministry's data is in error. Moreover, it is claimed that the increase in the number of transactions in the periphery and the spike in housing prices there is a result of the tax increase which is leading many investors to search for less expensive apartments to purchase."

link to the original article: http://www.mako.co.il/news-israel/local-q4_2015/Article-27919429edfe051004.htm?sCh=338cc3bdc7f26110&pId=25483675

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