| << Prev || עברית || Français || Русский || Next >> |
Part Five - The Economic Plan
The fall in housing prices following the reforms
The cancellation of construction prohibitions on private vacant land and free trade in the vast majority of public land[33] will immediately release land that is sufficient to build millions of housing units. The cancellation of the ban on high-rise construction will enable the potential construction of millions of additional units without the need for additional lands. Relative to the demand for new apartments, which stands at only tens of thousands of apartments per year, the potential supply of apartments will be almost infinite. The increase in the supply of available land for construction and the existence of an alternative in the form of high-rise construction will lead to a drop in the price of land - a significant component in the housing prices.
In order to clarify the significance of canceling only one restriction, the restriction on high-rise building, one can observe the following data: In the Tel Aviv-Ramat Gan-Givatayim area there are approximately 22,000 buildings, most of which can add at least three floors. If we assume that three floors are about 10 apartments, the cancellation of the ban on high-rise construction means the addition of some 220,000 potential apartments. If added to the possibility of destroying some of the old buildings and building tall buildings in a process of evacuation-construction, the potential could rise to 300,000 or more new apartments. In other words, canceling only one restriction in one area can create potential for building hundreds of thousands of new apartments.
The easing of regulation on developers following the cancellation of the City Building Plan and the simplification of the building approval process will make the construction more profitable, with the profit expected to be divided between developers and purchasers.
The process of approving construction will be much faster and simpler, so developers will be able to profit from their investments in a shorter period of time. This will enable them to save interest payments on loans or to invest in additional projects, thus translating the time savings into additional profit.
Limiting the power of the local authority to interfere with construction or impose arbitrary restrictions on it will reduce the developers' risk of having to delay the execution of the work or incur costly changes. Today, construction developers take these risks into account and include them in the price as "security coefficients," so risk reduction is likely to result in price reductions.
In addition, the cancellation of taxes and special levies on real estate and the cancellation of protective tariffs on imported building materials should be taken into account, which will lead to a direct reduction in house prices.
[33] The reference is to those vacant lands that the state now holds; not to land that has been used.
| << Prev || עברית || Français || Русский || Next >> |