The controversy in Israel is escalating over those who bear the actual responsibility for the continuation of the housing crisis and the high cost of apartments, at a time when prices exceed the capabilities of the Israelis, despite the availability of approximately 80 thousand unpaid apartments in the market.
At the heart of this crisis, a direct and public accusation is highlighted by Professor Avi Samhoun, President of the “National Council for Economics”, addressed to major banks, accusing them of being the element that hinders prices lowering and prevents competition.
According to the Calcalist newspaper, “Kabinet housing” decided to form a special committee to examine the role of banks in stabilizing prices and preventing developers from disposing of freely in pricing their units, while they were chosen to lead the committee. But the formation decision faced from the first moment a strong opposition from the Bank of Israel, who sees this path “irresponsible intervention” in bank financing tools.
Hidden hegemony runs the market
According to the Calcalist report, the position paper prepared by they allowed clear accusations that banks – headed by Laomi Bank and Hapoalim Bank – are practicing actual control of the market through financing tools, as it funds about 57% of construction projects in Israel, and imposes restrictions in contracts concluded with developers that prevent them from lowering prices even if the projects are profitable.
“We live in the illusion of the free market. There are hundreds of developers, but actually the decision in the hands of two banking entities that monopolize financing and control pricing,” he said.
“Any developer tries to reduce the price, it is afraid that banks will back away from its financing in other projects, which creates intended stagnation in the market.”
Bank of Israel defends itself
On the other hand, the Bank of Israel expressed a sharp defensive position, warning that any government interference in the financing mechanisms may lead to a high cost of real estate borrowing, the reduction of supply, and the increase in pressure on families.
“The interference in the financing agreements may push banks to request more self -capital from the developers, which leads to slowing construction and high prices, instead of reducing them.”
Despite this extremist position, the bank was announced in the committee’s work, in what appeared to be an attempt to contain the path without giving up actual domination of the financing mechanisms.
Developers are trapped with unfair contracts
The Calcalast report reveals that the contracts concluded by banks with the developers include items that prevent them from lowering prices during construction, even if there is a profit.
These data came from meetings that brought together the Director General of the Ministry of Housing, Jews Morgensteren, with a number of developers who emphasized that they do not have freedom of pricing, as the bank requires maintaining pre -specified prices in the “feasibility report”, fearing that other projects funded from the same side will be affected.
According to Samon: “The Bank of Israel demands the government to take responsibility for housing prices, and at the same time prevents it from compromising the root of the problem: monopolistic bank financing.”
Recommendations break silence
The Samon paper includes 4 central recommendations that observers considered “confrontational” with banks:
- The banks announce a “monopoly gathering” in the construction project financing market.
- Blocking items that prevent developers from lowering prices.
- Preventing banks from interfering in project pricing after signing the financing agreement.
- Obliging banks to reveal their internal documents regarding the relationship with developers.
These recommendations, and if not officially included in the decision to form the committee, pave the way for an open clash with banks, which, according to analysts, are trying to protect their standard profits in recent years by ensuring the stability of the market at a high price level.
Continuous accusations
Bank of Israel responds to these accusations by noting that the prices of apartments in the “second hand” market – which are not directly related to banks – rose at a higher pace than the prices of new apartments, which indicates, according to his opinion, that banks do not hinder the low prices.
But they allowed this logic to refuse, saying: “This justification is no longer standing in front of reality. We have 80,000 apartments that are not allowed, and this in itself is sufficient to explain that the problem is not in demand, but in the system that prohibits the price of prices deliberately.”
Crisis of confidence and reformist paralysis
This confrontation between the government and the central bank reflects a collapse in confidence between the authorities responsible for economic planning, and it reveals that the housing crisis in Israel is no longer the result of a lack of offer or difficulty marketing, but rather the product of a closed system of financial interests and control.
In light of this stalemate, the Israeli families remain hostage to prices that do not reflect the real offer, while the big players – banks and financiers – continue to make profits from the paralysis market.
