With the International Monetary Fund (IMF) warning of a possible bursting of the housing bubble in Israel, a committee including Prime Minister Benjamin Netanyahu has just approved proposals to exempt some first-time buyers from value-added tax and to put a cap on new home prices.

Property prices soared by 80% in Israel between 2007 and 2013, while wage increases trailed at 25%, according to the Central Bureau of Statistics in Jerusalem.

Israel’s $273bn economy has already been negatively impacted by an ever appreciating Israeli Shekel and depressed global demand that have cut into exports. GDP grew by 3.3% in 2013, the slowest growth since 2009, and the Bank of Israel expects GDP growth of 3.1% this year.

Netanyahu told an Israeli TV Channel in early March that his government hasn’t done enough to tame housing prices and in February the IMF warned that Israeli home prices were 25% overvalued.

One of the measures just approved and promoted by Netanyahu, would cap prices for some new construction at 20% below the end-2013 market median by subsidising land costs.

According to government statistics, a three-bedroom apartment in Tel Aviv costs around $800,000 while the average annual wage is around $33,000.