Government to slash residential land prices

“Apartment prices in price-for-resident tenders will be reduced by hundreds of thousands of shekels,” says Construction, Housing Ministry.

By ORI CHUDY / GLOBES
March 9, 2011 23:37
2 minute read.
A moshav house with a pool in the yard.

311_moshave home. (photo credit: Courtesy)

 
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The cabinet is due to approve at Sunday’s meeting a decision to grant a 50 percent discount on land prices in Construction and Housing Ministry “price for resident” tenders, which are designed to help persons eligible for ministry benefits (such as young couples and new immigrants).

For the first time, the government will subsidize the price of land in these tenders as a way to further reduce the price of homes in price-for-resident tenders and help young couples and families buy an apartment.

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In the price-for-resident tenders method, the discount directly reflects the final price of a home because there is no competition over the price of the land, whose price is given.

Developers compete directly to build homes at the lowest price, pursuant to Construction and Housing Ministry specifications and supervision.

“Apartment prices in price-for-resident tenders will be reduced by hundreds of thousands of shekels,” the Construction and Housing Ministry said Wednesday in a press statement. “The decision will come into effect immediately on price-for-resident tenders, and contractors will be able to compete for the lowest price per home and pay only half the cost of the land.

“Expert assessments estimate that the discount will mainly affect high-demand areas, where the price of land accounts for 40%-50% of an apartment’s price. The reduction could therefore amount to hundreds of thousands of shekels in high-demand areas, with an emphasis on young couples and people who don’t own a home.”

Construction and Housing and Minister Ariel Attias (Shas) said: “For the first time, the government realizes that it can and should pay out of its own pocket for the land, to achieve the dream of young couples and people who don’t own a home to buy an apartment.”



The Finance Ministry said in response: “This proposal deals with price-for-resident tenders.

In these tenders, the price of the land is set by the assessor and not by the tender. The development costs are set on the basis of estimates. The proposal states that, for the first time, in these tenders the state should subsidize the apartment prices by foregoing half of the income from the land.

“The proposal is effectively a budget-bypassing grant for home buyers to the tune of hundreds of millions of shekels a year. It will cost the state revenues and increase the budget deficit. It should be noted that, in certain tenders in various areas (high-demand areas), the value of the proposed benefit could amount to hundreds of thousands of shekels per housing unit.”

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