JERUSALEM, June 12 (Reuters) – The Israeli government plans to dramatically boost housing starts and extend a rebate program aimed at curbing rapidly rising house prices as demand continues to outstrip supply .

Under a joint plan of the ministries of finance, interior, construction and housing, Israel aims to start building 280,000 homes by 2025, an average of 70,000 per year. That compares to about 55,000 a year over the past decade.

Construction and Housing Minister Zeev Elkin noted that the various incentives would mean a loss of up to 20 billion shekels ($5.89 billion) for the country’s land authority, which allocates Israel‘s land to promoters.

“The plan is not a one-step magic bullet,” Elkin said at a news conference on Sunday. “(But) we believe (it) … will stabilize the housing market in Israel.”

The proposal, parts of which require parliamentary approval, also includes other measures, such as cutting red tape and building more rental housing.

This is the government’s latest attempt to contain housing costs, as previous ones failed to stabilize prices.

It takes twice as long to build an apartment in Israel as it does in the United States and Britain, Finance Minister Avidgor Lieberman said at the press conference, citing data from Israel’s Central Bureau of Statistics.

Lieberman also warned that other factors beyond the government’s control could slow progress.

Analysts and central bank policymakers have long said that the current number of housing starts in Israel is too low to meet demand from buyers looking to invest or buy a home.

Along with the lowest mortgage interest rates, house prices have more than doubled since 2010, rising 16% in the past year alone.

Rents have also jumped, squeezing many people out of the market and contributing to higher inflation. Israeli media reported double-digit gains in rental rates this year.

Data shows that a four-room apartment in Israel costs on average nearly 2.5 million shekels, with prices much higher in Tel Aviv, Israel’s financial and cultural capital.

($1 = NIS 3.3931)

Reporting by Steven Scheer; Editing by Maayan Lubell and Jan Harvey

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