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·    The Research Department is holding a conference today, in collaboration with the Sapir Forum, on “Housing Market Issues”

·    At the conference, research conducted at the Bank of Israel Research Department, as well as external research, was presented. Prof. Rachelle Alterman from the Technion addressed the conference, and there was a panel of experts from the academic world and public-sector policy makers for a discussion on policy issues.


A conference by the Bank of Israel Research Department in collaboration with the Sapir Forum was held today in Jerusalem. The conference dealt with various housing market issues, mostly related to policy that impacts on this market.


The Governor of the Bank opened the conference, noting the great importance of economic research related to aspects of the housing market being professional and high-quality, and using the most advanced research methods, so that policy makers have the best data available, which is necessary for making informed decisions.


“The process of creating the supply that will provide a response to demand is long and complex, and the government has a major role in this, as it is the owner of most of the land and is responsible for the planning and licensing process, both in regard to various aspects of regulatory policy, and in regard to taxation policy. The Bank of Israel also has a role in the real estate market, in its function as the supervisor of banks, which are the main source of financing for the market, and in its role in maintaining the financial stability of the system. In this regard, in recent years we took several steps to reduce the macroprudential risk, against the background of the increase in scope of housing credit. These factors make the real estate market very complicated, and one that requires informed policy—which is where another Bank of Israel function comes into play, as economic advisor to the government. In that role, we examined various policy measures and assessed their impact on the housing market:


·     We recommended bringing in foreign construction companies, which will bring with them advanced construction methods and will improve the productivity in the industry, and at the same time, we expressed our opposition to importing foreign workers, as cheap labor reduces the incentives for increasing productivity in the industry.

·     We recommended to increase the scope of land available for building in areas of strong demand and to create a stock of available plans for future years

·    We noted the need for higher density building in cities (via vacate-and-build projects) and for building appropriate infrastructures, such as public transportation systems

·     We also noted the necessity of shortening the length of time from construction planning to actual start of building.

·     We presented research findings on housing affordability—which troubles us mainly in view of the prolonged increase in home prices in recent years

·     We assessed the scope of demand for homes in the market based on demographic developments, and more.”


Afterwards, research by the Bank of Israel’s Nitzan Tzur-Ilan was presented, which examined the effect of mortgage loan to value ratio limitations on households’ decisions when buying a home. The research found that households on whom the loan to value limitations were imposed on the loans they took, chose, after the limitation was imposed, housing assets that were less expensive (in real terms), further from the center of the country, and that were in neighborhoods with lower socioeconomic rankings. Presentation


Other research, by the Bank of Israel’s Itamar Caspi, presented an econometric test to examine the behavior of home prices over time, which was implemented on data for OECD countries. The research found that we cannot negate the hypothesis that in recent years, home prices in some OECD countries behaved in a manner than from an econometric perspective would be defined as explosive. Presentation


The Bank of Israel’s Dana Orfaig’s work found that the impact of monetary interest rate shocks on home prices is relatively low, as was found in similar research worldwide—a negative shock of one percentage point in the interest rate leads to an increase of about one percentage point in real home prices. Presentation


Weitzman Nagar from the Bank of Israel and Doron Sayag from the Central Bureau of Statistics presented a hedonic index for land prices in Israel. Presentation 


The address by Prof. Rachelle Alterman from the Samuel Neaman Institute at the Technion dealt with problems and challenges of housing policy in Israel, presenting a view of the housing market from the outside looking in. Presentation


In the afternoon session, Ofer Raz-Dror from the National Economic Council presented his research, which examined the effect of National Outline Plan (NOP) 38 has had on home prices. He found that NOP 38 contributed to an increase in prices of homes that were able to be renovated within its framework and that the effect in the center of the country was greater. Presentation


The Bank of Israel’s Elad Demalach presented a joint paper with David Genesove and Asaf Zussman from the Hebrew University and Noam Zussman from the Bank of Israel, which examined the effect of proximity of cellular sites (antennas) on home prices. Their research indicates that there is not a statistically significant effect of cellular sites on home prices. Presentation


The conference concluded with a panel moderated by the Director of the Bank of Israel’s Research Department, Prof. Nathan Sussman, ​and with the participation of Dr. Danny Ben-Shahar from Tel Aviv University, Prof. Omer Moav from IDCHerzliya, andMr. Eran Nitzan, Deputy Budget Director at the Ministry of Finance. The panel discussed central questions related to housing market policy.