Banks to be required to allocate more capital against their housing credit portfolios
by Adi Ben -Israel
The Bank of Israel said it is imposing new restrictions on mortgages amid a continued increase in home prices and the value of mortgages, with Supervisor of Banks David Zaken distributing a draft guideline to the banks calling for a larger capital cushion against the mortgages they grant to homebuyers.
“The draft guideline is being published in light of the continued growth in housing credit and its proportion of the total banking credit portfolio,” the Bank of Israel said Sunday. “
The aim of the guideline is to enlarge the capital cushion that the banking system allocates against its housing-credit portfolio, because of the rise in the risks inherent in this portfolio, and thereby strengthen the banks ability to absorb unexpected losses, and reinforce financial stability in general.”
The guideline states that, beyond the targets set by the Supervisor of Banks for Tier 1 capital for banking corporations (9% by 2015 and 10% by 2017 for the two largest banks), the lenders will have to increase their capital by an amount representing 1% of their credit for housing. Implementation will be in stages, with the date set for meeting the capital target determined in the guideline being January 1, 2017
Bennett unveils revamped aid program for tech industry
National technology innovation authority to offer loans, investments
By Yuval Azulai & Gali Weinreb
The Ministries of Finance and the Economy last week announced a reform in the Office of the Chief Scientist aimed at facilitating state support for entrepreneurship and innovation that will center around the establishment of a national authority for technological innovation with a wider range of tools for providing aid to companies and entrepreneurs.
“The reform constitutes a revolution that is taking place for the first time after 20 years of the Office of the Chief Scientist”, said Minister of the Economy Naftali Bennet. “It will shorten processes and provide the right toolbox for enhancing Israeli innovation and bolstering economic growth. Together with the Angels Law, the reform will release a huge amount of energy into the Israeli high-tech market”
Bennett said “the tools now available to the Chief Scientist are like an old-fashioned dial phone in the iPhone 6 era,” adding that as an ex-high tech CEO, he didn’t use the tools then offered by the Chief Scientist because they weren’t suitable for his company. “With the coming reform, the Office of the Chief Scientist will operate at a sector 20-25 years ahead into the future in Israel through its flexibility and the diverse and up-to-date facilities it offers.”
the authority is slated to begin operating in 2016 as an operational arm of the Office of the Chief Scientist with Chief Scientist Avi Hasson serving as its chairman. The authority also will have a director general, while its board of directors will be composed of representatives of the Ministries of Finance and Economy and 3 representatives from industry.
Hasson, Bennett and Minister of Finance Yair Lapid have been promoting the reform for the past year because they believe the Office of the Chief Scientist’s existing tools no longer are fulfilling the actual needs of companies and entrepreneurs engaged in innovation.
While current assistance is mainly in the form of support through grants, when the new authority begins operating, the state will be able to support innovative ventures, among other things, through equity investment, guarantees, and loans.
If, hypothetically, it is necessary to establish activity in genetic research, after the reform, the state will be able to invest $5 million to accompany a $25 million;n investment by a foreign investor. In the current situation, the government has no tools for supporting such a venture, because it will take the government 2 years to approve the program. We’ve got to be a lot quicker Bennett told “Globes.”
Hasson said the new authority would be statutory and would be able to take action on industry’s needs “quickly and effectively.””We’ve built a system of balances and brakes to preserve the governments goals with a wise, flexible and innovative policy according to standards adapted to the sophistication and innovativeness of the industry we are serving. The Israeli high-tech industry, with its impressive achievements over the past 20 years that have made Israel one of the world’s leading centers of innovation, is in an alarming slowdown, and significant measures are therefore necessary to restart it.”
The plan will be presented at the socioeconomic cabinet meeting next Sunday, after which it will be brought before the Knesset as part of the Economic Arrangements Bill submitted by the government.
Before the program can be implemented, a change in the current Research and Development Law also is necessary. the budget of the Office of the Chief Scientist currently totals almost NIS 1.5 billion.The authority itself will be budgeted by the state, and future royalties paid by companies that have received aid will go to the state.
At the same time, Bennett told “Globes” he was acting to increase the Chief Scientist’s 2015 budget, adding that , as part of comprehensive staff work he had led with a team on the subject, he consulted leading high-tech figures in an attempt to identify the current gaps.
Several dozen Ministry of the Economy employees slated to work in the framework of the new authority object to the new program, however, as does the Manufacturers Association of Israel, which has expressed reservations about it on Sunday.
“We welcome any measure that will improve the way the government system works,” said Manufacturers Association CEO Amir Hayek. “In this case, however, the proposal includes an injection of funds designated for industry into venture-capital funds whose goal is to maximize their profits in the short and medium term, and certainly not the development of advanced and sustainable industry in Israel. We’ll get an innovation authority, but there’s a major risk that it will contribute to innovation, but not in Israel.”
The number of new home sales was down 24% in Jerusalem and 20% in Tel Aviv.
The number of new homes sold in Israel in the first half of 2014 was down 21.7%, the Central Bureau of Statistics reports.
In July the number of new apartments was 2,530 of which 1,450 were sold to the public and 1,080 remained unsold.
52% of new apartments were built on privately-owned land. The number of new apartments built in the first half of 2014 was 20.6% lower than in the corresponding period of 2013.
During that period there were falls in all the country’s regions – about 25% in the central district, 24% in the Jerusalem district, 23% in the southern district, 20% in the Tel Aviv district, 17% in the Haifa district, and 5% in the northern district.
Of the 11,690 homes sold to the public in the first half of 2014, about 9,320 homes were built privately and 2,370 homes by public companies.
Published by Globes [online], Israel business news – www.globes-online.com – on August 28, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2014
I just read an article how arnona will go up by 2015 and then saw this article. Is there no relief in sight? It just seems the little person who works 2 jobs or long hours to manage financially every month, this system will work against us especially if they will be using a remote control device .
Tel Aviv leads collection, and Jerusalem will boost revenue with automated enforcement.
It isn’t easy to obtain figures for revenue from parking fines in Israel, because they are buried deep in the budget reports of the municipalities and local authorities. But the search is worth it: the figures show that this is a huge industry that generates an aggregate of more than NIS 400 million annually. This money represents a vital part of the municipalities’ income, reaching as much as 5% of their total budgets in some cases.
The record holder is the Tel Aviv municipality, which garnered NIS 142 million just from parking fines last year, several million above the forecast, and close to 3% of its total revenue. For the sake of comparison, in the same year, the Tel Aviv municipality’s revenue from fees for legal parking, in parking lots, via mobile telephone and by other means, was half of this, just NIS 72 million.
The Jerusalem municipality collected only NIS 50 million from parking fines, but small authorities in Gush Dan managed to generate revenue of between NIS 5 million and NIS 17 million each. Even a small town like Hadera collected NIS 8.5 million in parking fines last year.
To produce this revenue, the municipalities employ a small army of inspectors, tow trucks, collection agencies and so on, that carry out their work efficiently and stubbornly, and in some cases have quotas and are compensated according to results.
Unfortunately, the municipalities, backed by the state, are not making do with this. Behind the scenes, a technological revolution is taking place that will turn the parking fines industry into an efficient and unwearying high-tech monster, dramatically upgrading its ability to milk us.
One of the leaders in automation is the Jerusalem municipality, which it seems is jealous of Tel Aviv’s fat revenues from parking fines. Last week saw the conclusion of a tender in which the Jerusalem municipality called for information and preliminary proposals for deploying a parking enforcement system based on video, picture identification, and remote control that will operate in all weather conditions, day and night, seven days a week.
The municipality sets out no fewer than 39 parking offences, with fines ranging from NIS 100 to NIS 500, that it seeks to enforce automatically. Technological enforcement will be much more aggressive than current methods, without the discretion exercised by a human inspector. For example, the system will issue a fine even in the case of a vehicle parked legally, if the parking meter tag is wrongly displayed.
Some among us will say, “What’s the problem? Park legally, or take public transport.” If the solution were so simple, we wouldn’t see the item in municipalities’ budgets “forecast of revenue from parking fines”, which turns out to be highly accurate. There are formulae for calculating the average traffic density in a city and the number of available parking places, and hence the fines that will be collected. Besides which, the municipalities effectively control the number of available parking places, and, on the face of it, the revenue from fines reduces their motivation for investing in their provision.
In short, this is a classic case of the cat guarding the cream. Only in our case the cat is about to become equipped with technologies that produce an inexhaustible cream source.
Published by Globes [online], Israel business news – www.globes-online.com – on June 24, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013
The percentage of households owning more than one home increased nearly 2.5 times from 2003 to 2012, according to a Bank of Israel study released Wednesday, although recent rules have stymied the trend somewhat.
While domestic investors accounted for 3.2 percent of home owners in 2003, that rate rose to 7.9% in 2012, the study found. Yet new rules meant to make investments in second homes less attractive pushed the rate down about 10% in 2011 and 2012 compared with the first eight years in the study.
“The decline of the share of investors in the housing market is still not significant as the state would like, and it will not make a significant contribution to the lowering of housing prices,” said Zvi Livneh, CEO of mortgage advisory group Livneh-Ben Canaan, who cited the historically low interest rates as the main driver.
“Investments in housing have become central for those who want a relatively solid return of 4% to 7%,” he said. “As long as the interest remains low, investors will be an inseparable part of the housing market.”
While rental yields and interest rates are linked, the study found that when it separated the effects of each on investors, the rental yield had a greater influence.
As rent prices go up, more investors flood into the field; each percentage-point increase in rental yield increased the likelihood that an investor would buy a home by 22%. But every percentage-point increase in the interest rate decreased the likelihood of an investment by only 8%.
The greatest investment demand throughout the entire period was in Tel Aviv, which accounted for 29% of the purchases. In general, people buying second apartments to rent out tend to prefer smaller places, which yield higher relative rents, located in Jewish communities within the country’s center.
The bill now moves on to the Knesset Finance Committee.
The changes already made include raising the eligibility threshold for applicants who did not serve in the IDF or National Service from NIS 600,000 to NIS 950,000, and eliminating the eligibility document. The revised bill also sets September 1 for the law to come into effect.
The bill is also opposed by Bank of Israel Governor Dr. Karnit Flug who fears that much of the savings in 0% VAT will not find its way into the buyer’s pockets.
Published by Globes [online], Israel business news – www.globes-online.com – on June 16, 2014
* The big question is, who will it benefit?
The goal is for the Knesset to approve the zero VAT bill for first-time homebuyers by September 1.
The cabinet today unanimously approved the zero VAT bill for first-time homebuyers of new apartments. The bill now goes to the Knesset Finance Committee and to the Knesset plenum. The goal is for the Knesset to approve the bill by September 1.
For the law to come into effect as planned on September 1, the parties involved in writing it must complete all preliminary work. Government Assessor Tal Alderotti must draw up the price per square meter tables for each area where the tax break will apply, the Israel Tax Authority will have to prepare a mechanism for the public to access information about the tax break, and the ministers of housing and finance will have to set precise specifications about the applicable apartments.
Published by Globes [online], Israel business news – www.globes-online.com – on June 22, 2014
The maximum price for which a VAT exemption will be granted to those who have not served in the Israel Defense Forces (IDF) or civilian national service, it is believed, will change from NIS 600,000, as the Ministry of Finance announced yesterday, to a larger amount. This follows the stubborn objections of Minister of Construction and Housing Uri Ariel, and comments by the Minister of Justice, and the Attorney General that if there are insufficient new apartments in this price range then the price will change.
“The compromise presented by the Ministry of Finance for the VAT criteria is unacceptable,” said Minister of Construction and Housing Uri Ariel at the Knesset Finance Committee meeting on the housing crisis. “The compromise needs to be more egalitarian. I repeat: there will be no NIS 600,000 limit for people who did not serve, it won’t pass. Why? Because there are no such apartments, maybe a few, and, in addition, the Finance Committee, in my opinion, will not allow it.” Ariel’s comment comes after he attacked the compromise as unrealistic yesterday, following its announcement by the Ministry of Finance. Ariel also said he would be speaking to the Attorney General to emphasize that there are no new apartments for NIS 600,000 on the market.
It appears that Minister of Justice Tzipi Livni is also demanding explanations about the compromise. Livni instructed Ministry of Justice Land Appraisals Council chairperson Tal Aldrussi to check whether the data presented to the Ministry of Justice in the discussions of the zero-VAT agreement are correct and accurately reflect the reality in the market.
According to Livni, if the data are not in line with reality, “There will be no escaping changing the relevant clause.” She further said that “Encouraging and rewarding young people who bettered their country by serving in the IDF or national civilian service, is a worthy process, and is our duty. If it becomes clear that the figures presented to the Ministry of Justice, based upon which the Attorney General made his recommendation to the government, are inaccurate, and are not in line with reality, there will be no choice but to adjust the amount at which the benefit is given, without harming the benefits given those who served their country.”
Published by Globes [online], Israel business news – www.globes-online.com – on May 12, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2014
Israel agrees to turn American’s bank accounts over to IRS
By Niv Elis
The New York developer owned by Gary Barnett intends to raise up to NIS 700 million.
US real estate company Extell Development Company, owned by Gary Barnett, has published a draft prospectus for an bond offering of up to NIS 700 million on the Tel Aviv Stock Exchange, via Extell Limited. The bonds are rated A2.
Extell posted a profit of $203 million in 2013, and at the end of that year had shareholders’ equity of $654 million. The Extell group is one of the largest and most active real estate developers in New York. It is the developer of the prestigious One57 project in Manhattan, a tower combining residences and a hotel and the tallest residential tower in the city. It is currently being completed, and is expected to yield revenue of $2.6 billion.
Among other assets, the company owns the 509-room W hotel on Times Square in New York, valued at $505 million.
The Tel Aviv offering will be managed by a consortium headed by Apex Underwriting and Issue Management Ltd. Law firm Shimonov & Co. and accountants Kost Forer Gabbay & Kasierer are acting for Extell.
Extell is making the offering in order to finance real estate investments in the US, chiefly in New York.
The Extell group was founded in 1989. Gary Barnett was named Most Powerful Person by the New York Observer magazine in 2013.
Prices per square foot rose in Manhattan in 2013, with igh demand for luxury apartments, Extell’s specialty. In January 2014, prices were estimated at $1,302 per square foot, 10% more than in January 2013. The average rent in Manhattan in October 2013 was $4.73, compared with $4.61 in October 2012.
Published by Globes [online], Israel business news – www.globes-online.com – on May 11, 2014
Finance Minister Yair Lapid and Attorney General Yehuda Weinstein have compromised.
The main factor entitling buyers of new homes to be exempt from VAT will be military or national service, it was agreed today in discussions between Finance Minister Yair Lapid and his top officials and Attorney General Yehuda Weinstein and his officials.
However, following lengthy discussions Weinstein refused to set criteria which did not extend to the entire population while Lapid insisted on preferential treatment for those who undertake military or national service.
Ultimately a compromise was reached. Those undertaking national service will be allowed to buy a 0% VAT apartment for up to NIS 1.6 million including VAT. Other Israelis will be able to buy a 0% VAT apartment up to NIS 600,000 including VAT.
Published by Globes [online], Israel business news – www.globes-online.com – on May 11, 2014