Real estate is boiling, but those who are supposed to do something act like observers

For the information of the Minister of Finance Avigdor Lieberman: The real estate market R-WTH, and instead of raising the purchase tax again (after your predecessor in office lowered the tax rates by mistake), as one of the preventive measures that will try – at least try – to cool the boil, you raise taxes On disposable utensils.

For the information of the Governor of the Bank of Israel, Prof. Amir Yaron: “N. Followers are fine, but what about some quick action, or recommendation for such action? After all, you are the government’s economic adviser.

These are the data published this week on the activity in the residential real estate market for the month, and they indicate more than anything that immediate steps are needed before the trend of price increases in the housing market gets out of control.

The total number of apartments purchased was 12.5 thousand, an increase of 40% compared to May 2019 (pre-Corona) and an increase of 15% compared to April. Leading the acquisitions, as in previous months, were the investors – another clear sign of a spin in the real estate market. The total number of apartments purchased was 2.5 thousand apartments, a sharp increase of 117% compared to May 2019 and a 27% increase compared to the previous month.

Since the purchase tax was reduced at the end of July last year, investors have purchased about 21,000 apartments in the last ten months alone (August 2020-May 2021). This is the highest amount of total investor acquisitions in each of the years 2017-2020. At the current rate of investor acquisitions, which has accelerated further since the beginning of the year, 2021 may record one of the highest levels of investor acquisitions in the last 20 years at least (!). Another clear sign of a spin in the residential real estate market.

Comparing the level of transactions in the free market last May with its counterparts in the last 20 years, it was found that this is the second highest level (it is preceded only by the level of sales in May 2013). In the market segment of new dwellings sold in the free market, this is the highest month in May in this comparison, although it should be noted that a relatively high level of purchases of rental housing complexes by companies operating in the field contributed to this peak.

The result of these data is well seen in the mortgage market: in the first half of 2021, the volume of mortgages granted to the public was close to NIS 52 billion, almost the same as the volume taken in all of 2018. The total mortgage volume is about NIS 430 billion, an increase of 40% In less than five years. The scope and duration of her mortgage are also growing: her average mortgage is about NIS 930,000 for 22 years. Although the interest rate is very low and helps mortgage takers, the picture is clear: policymakers have lost control of the real estate market. It started with the previous government and continues with the current government.

So what are you waiting for Minister Lieberman and Governor Yaron?
I did not add Housing Minister Zeev Elkin for a simple reason: he is currently engaged in battles between the coalition and the opposition.

Zeev Elkin (Photo: Miriam Elster, Flash 90)

2 This is the fourth wave of the corona. A different wave, with a huge advance on vaccines, but still a fourth wave. And this wave, like the previous waves, could have consequences for the economy, which of course no one can expect. This is the nature of uncertainty.

After the last wave, the economy began to recover as quickly as expected – the deficit data and the declining unemployment data. Now a question mark hovers over all this recovery. It is true that the numbers are still relatively low, but they are rising rapidly.

Unemployment figures are a source of concern: they are falling, but not rapidly. According to CBS data, the percentage of the unemployed in June was 5.4% (about 225,000), compared with 5.1% in May this year. – 274 thousand), compared to 6.8% in May. Total unemployment rates, including those in the labor force who stopped working because of their dismissal or closure of the workplace from March 2020 plus the number of employed persons who were temporarily absent from work all week due to Corona virus-related causes. 9% (about 387,000), compared to 9.8% in May.

The concern is that the economy, and I mean the private sector, “exploited” the corona crisis for operational efficiencies, as I get the impression in conversations with business people. That is, he reduced fats, made a diet, and when the economy returned to operation he was in no hurry to bring back some of the workers who found themselves out. One must of course wait patiently for the end of the year, but it seems that the fourth wave will only strengthen this trend of operational efficiency, and thus it will be difficult to see unemployment return soon to its historic lows.

This is one problem. Another, forward-looking problem is the effect of the fourth wave on labor markets. This week I spoke with two self-employed people, small business owners, aged between 50 and 60. Both did serological tests for a fee to check the level of antibodies since the vaccines. The test showed that the level of antibodies has dropped, but they are still above the threshold that requires additional vaccination, which is in line with data from the Ministry of Health on a decrease in vaccine effectiveness. This is one of the main reasons, by the way, that Pfizer is seeking approval for a third vaccine. But apart from the medical debates about the need for a third vaccine, and if so, when to start it, it will have an impact on the economy.

Those self-employed want to see where they stand in terms of health because the era of corona grants has passed, so the serological examination reassured them at this point. But it does not only depend on them, but it also depends on the spread of the fourth wave, and as time passes, the signs are not encouraging. The scope of active isolation already stands at about 100,000, and this may only increase. Who will absorb for the self-employed a period of isolation when they have no budgetary source to cover it? Of course, the numbers are relatively small, and 100,000 isolations is still on the margins relative to the number of workers in the economy, and while businesses are open to consumers, one can manage one way or another, with temporary damage to the isolation period.

But as the trend worsens and the numbers grow daily, it can become an economic problem, especially for the self-employed. Therefore, those who said in the government that “even 15,000 verified people a day should not be alarmed” do not address the damage that could be caused to the economy, and especially to the self-employed. There are, of course, plenty of solutions, and they are again budgetary solutions, but certainly not MK Abir Kara’s delusional proposal for essays to go abroad to curb proliferation. By the way, he thought that among those who go abroad there are also self-employed people that he is supposed to represent.

3 I hear the budget demands of the ministers of defense and health – and I am appalled. Dear friends, we are at the beginning of a challenging period with the fourth wave of the corona, and billions of budget additions are not growing on the trees. Although the deficit rate continued to decline in June, it still stands at 10.1%, about NIS 145 billion. The most worrying statistic: the rate of expenditure has increased in the last six months by 4% compared with the corresponding half last year, and this is further neutralizing the expenditure of the economic program for the corona crisis.

The budget of the economic plan for the Ministry of Health was about NIS 22 billion, of which about NIS 15.5 billion has already been transferred, but the system wants more and more, and so does the defense system.

Bnei Gantz (Photo: GPO)Bnei Gantz (Photo: GPO)

Here are the numbers of the budgets of the two ministries, according to the financial statements of the government:
The budget of the Ministry of Health (net execution) in 2012 was about NIS 21 billion. The same budget in 2019 was about NIS 38.5 billion – an increase of about 83% – an impressive increase by all accounts, far beyond the natural increase in the population. The budget of the Ministry of Defense (net execution) in 2012 was about NIS 53.5 billion.

The same budget in 2019 was close to NIS 70 billion, an increase of about 31%, unlike the Ministry of Health, but still an impressive increase. In the past, I analyzed the budget of the Ministry of Health – a significant part of which increased due to increases in doctors’ salaries. These are the numbers, and if anyone thinks that the continued increase in government spending will not be reflected in levies or taxes (which are already popping up) – he is deceiving himself.

Nitzan Horowitz (Photo: Miriam Elster, Flash 90)Nitzan Horowitz (Photo: Miriam Elster, Flash 90)

What is disturbing is the silence of the so-called “professional ranks” in the Ministry of Finance. For example, why not hear Yoav Gardos, acting budget director, or Ram Blinkov, finance director, appoint Lieberman? I sincerely hope that there is a good reason for their silence, on the eve of the formulation of the budget and the inflated demands that are flying in all directions.

4 Tamar Zandberg, the Minister of Environmental Protection, is very much promoting the carbon tax, which could of course increase the price of electricity for consumers. Such a tax has advantages, which everyone recognizes, but there are also disadvantages, which are not really publicized, but here they are, not from the fruits of pens, but from the pens of experts who prepared a report for the Ministry of Environmental Protection about a year ago.

The most significant disadvantage is that such a tax, as an indirect tax, could lead to an increase in inequality and hurt the low-income population. The tax stems from the fact that electricity is an essential product, and therefore its share in the expenditure of low-income households is higher than its share in the expenditure of high-income households. “

“It can be seen that the additional cost for the average household, in the scenarios examined, ranges from NIS 9 to 56 per month. Of course, the wider the use of renewable energy, the smaller the additional cost to the average household’s electricity bill. It should be noted that in many OECD countries it is customary to ensure that the lower deciles receive economic benefits in various forms, to ensure that they are not harmed as far as carbon taxation is applied. These benefits can come in various forms, including coupons for public transportation, mail check at the end of the year, VAT benefits (my note: forget about all these benefits. If the tax goes up, no one will take care of the weaker sections).

“There are a number of options for using carbon tax money to support the lower deciles. This support can be expressed through targeted assistance to low-income households such as public transport vouchers. Low-income people live in an adequate standard of living in terms of energy consumption.Antainable energy is defined as a situation in which the energy bill (electricity and heating) does not exceed 10% of household income.

Also, this benefit in the energy bill can also be realized by providing a one-time payment for all households. This way more households will enjoy the benefit, but the low-income ones will receive less money compared to the first alternative (targeted assistance for low-income households). ”Similar to the previous section, many nice words to help the weaker sections, Will “paint” it in favor of helping the weaker classes.

“Carbon tax is designed to create incentives to switch to low-carbon energy, allowing the clean energy-producing industry to be more competitive. However, this goal can be achieved in the medium to long term. In the short term, government support is needed in an energy-intensive industry that can be significantly harmed. Rising energy prices, with no immediate ability to reduce its use or convert to substitutes. One way to do this is through corporate tax relief. Make sure that carbon taxation does not hurt the weakened population and local industry, “It is also recommended to channel the tax receipts for projects to reduce greenhouse gas emissions, in order to incentivize the economy to further reduce emissions.”

It is very nice that the report uses the words “make sure” that it does not hurt the weaker sections and the local industry, but it will not interest anyone when the tax goes up. The green organizations will celebrate, the weaker sections will lose.

My bottom line: Environment ministers have, historically, a tendency to merge and totally dedicate themselves to the agendas of green organizations, sometimes in an extreme and uneconomic way. It is perhaps worth mentioning this: a minister in the government, any minister, is not a minister who represents such or other organizations, he is a minister who represents the entire public, and especially the weaker sections, and certainly not a small and interesting group of journalists who applaud them from North Tel Aviv.


Source: Maariv.co.il – כלכלה בארץ by www.maariv.co.il.

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