Minister of Finance Yuval Steinitz senior economics advisor Dr. Avi Simhon ridicules the idea of a real estate-linked bond, which is supposed to reduce demand for housing by enticing investors away from buying apartments for investment, thereby lowering home prices.
"Such a bond could create a shortage of other bonds, because we currently are in good shape in terms of the deficit, and the government has issued fewer bonds," says Simhon. "There's another risk: apartment prices are now at a peak, and anyone who such bonds at this time is liable to absorb heavy capital losses in a few years. That is why these bonds should be issued when prices are starting to rise, not when they have stopped rising. We should have issued them 3-4 years ago, not now."
Simhon's remarks imply that the rise in home prices is coming to an end.
Knesset Economic Affairs Committee chairman MK Carmel Shama (Likud) first floated the idea of real estate-linked bonds. At the start of today's committee meeting, he said, "The only barrier is which index to use, which will reflect apartment prices. We see contradictory figures from the Central Bureau of Statistics and the Ministry of Finance. Israel has no mechanism to check apartment prices."
Shama's idea is simple: create a bond linked to real estate prices in Israel. If prices go up, the value of the bond rises, and investors will make money without actually buying an apartment. Ministry of Finance figures indicate that a quarter of home purchases are by investors, down from a third of all purchases a few months ago.
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