Fischer Calls for Faster Building Pace

Governor of the Bank of Israel Prof. Stanley Fischer has called on the government to increase the pace of construction of housing for young couples, Globes reported on Monday.

“We must build faster and a lot more to supply housing for young couples,” said Fischer. He noted that the number of mortgages granted by banks had grown 226% over eight years. “The lowest interest rate in the economy is the mortgage interest rate,” he said.

Regarding bank credit to contractors, Fischer said, “There is an argument that contractors are not receiving enough credit to build. Not only are they obtaining credit, they are also getting guarantees. There is NIS 200 billion in credit to contractors on the books. The construction industry is the riskiest sector in terms of problem credit. 10% of it is at risk, which is the highest proportion of any kind of credit – and this is at a time when the construction industry is booming. We must not reach a situation in which the next time we’ll ask why the banks are writing off loans to contractors.”

Meanwhile, the Knesset Research Department published a report for the Housing Committee on Sunday, analyzing the causes of high housing prices.

The report found that a new business cycle in the residential housing market began in May 2007, when prices began soaring. The housing prices index rose by 52.7% in real terms between May 2007 and February 2013.

The report attributes the situation to an array of factors in both supply and demand. The demand side included population increase, rising incomes, the mortgage interest rate, the public’s purchasing power, availability of bank credit for homebuyers and the change in the interest rate.

On the supply side, the blame was laid on the marketing of land for residences, the number of building permits issued, the price of labor and raw materials, planning procedures and the availability of credit for contractors.

Regarding the Netanyahu government’s repeated promises to provide more and cheaper housing, the report concludes: “The government’s efforts to alleviate the rise in prices has not only failed, but in recent months the pace of the rise in prices has sharply accelerated. This means that the policy tools have not had the desired result, and it is possible that these tools should be used more forcefully, especially increasing the supply and shortening the time needed to obtain building permits and the construction time itself, and to restrain demand by investors in the housing market.”