Jul.25, 2012 | 5:34 AM–Prof. Eugene Kandel, chairman of the prime minister’s National Economic Council, suggested bringing in major foreign contractors to compete for housing projects if nothing else lowers housing prices.
“The government needs to act with determination to lower housing prices. If we need to, we will take more drastic steps, like bringing big contractors from overseas for major projects here in Israel, and other solutions, like foreign financing,” said Kandel in an interview in Banking magazine, published by the Association of Banks in Israel.
“We don’t need to dictate to the contractor the price of homes, but if there isn’t enough competition that will lead to a drop in prices, the government needs to create it. We are working on solutions in this area,” he said.
Kandel reacted cynically to claims by the Contractors Association about the credit crunch affecting the industry, noting that builders themselves were offering homebuyers unusually generous terms that are in effect raising their costs.
“I flip through the pages of the real estate sections in the newspapers. Page after page I see contractors offering homebuyers [the chance] to pay 10% down and the rest in another two or two-and-a-half years when they move into the apartment,” he said.
He said the cost of capital for a contractor was 6% or 7% annually. “They complain that they have credit problems,” he said. “But the significance of delaying payment is that the contractor is effectively giving the buyer a discount of 12% or 13%. At the same time he isn’t ready to give a 10% discount on a cash payment, even if he would profit.”…Read More>>