How the new Israeli government plans to bring down housing prices
Ever since the new Israeli government was sworn in, there has been plenty of focus on its judicial plans.
This week - for the first time - the Israeli media have begun reporting what Benjamin Netanyahu and his government will do to bring down housing prices.
As we detail in our guide to Jerusalem Real Estate prices (now fully updated to include all the data from 2022), there has been significant price rises in Israeli real estate over the past three years.
Two courses of action
Kan - the Israeli national broadcaster - published an extremely helpful article this week - article in Hebrew here - reporting that the new government in Israel will set a two-pronged course of action.
The new plan will be included in the upcoming budget, which is expected to pass without any problems and is aimed at increasing the supply of apartments.
The new reforms are aimed at increasing the number of apartments to bring down prices. A rough summary is below
Sanctions for local government
The government plans to put more oversight over local authorities who are in charge of issuing permits for building work.
If the Ministry of Interior deems a local authority unable to fulfill its role, due to delays, it will pass on the authority to an alternative committee.
The specifics of who will take on this job have not yet been defined and could well add to the bureaucracy that is all too common in Israel.
Fines for developers
The other main point of action that looks set to be advanced is setting construction completion targets for developers.
If developers fail to meet said targets, fines will be imposed and land will be denied to those who do not meet the target.
According to the proposed mechanism, at the time the land is marketed, the Israel Land Authority will set a construction completion target for the contractor
A developer who does not declare that he has met the construction completion target will be fined 4% of the value of the land he purchased, for each year of delay.
Once the four years of delay have passed, the Israel Lands Authority can cancel the deal with the contractor and return the land back to its own control.
Assistance to developers as well
Also included in the plan, according to Kan, is the news that developers will be given relief when paying for land, to avoid delays due to financing issues.
The Israel Land Authority will give a leeway of two years to make payment, which can be made in three installments and not immediately.
The initial reaction to the plans has not been positive at all. There is a feeling that this plan will not make any changes to the market in the near term.
This may be due to the fact that new Housing Minister Yitzhak Goldknopf said in December that he did not know if there was a housing crisis in Israel.
Response from a Jerusalem-based real estate agent
(These are the thoughts of CapitIL Real Estate Agency Sales Director Ben Levene via his own market experience.)
As a real estate agent, I often see the effects of the supply vs demand issue in prime neighborhoods of Jerusalem, particularly in the Anglo-Jerusalem market of Katamon, Rehavia, the German Colony, and Baka.
It is not uncommon for a new government to have a new plan for addressing this issue, but the problem persists as governments keep changing.
The supply is so short in these neighborhoods, and I have seen firsthand how this affects the market.
In conclusion, while new government plans may address some underlying issues, it is unlikely that they will have a significant impact on the market in the short term.
Anyone looking to buy or move into a home in the prime areas of Jerusalem within the next 4-5 years should not be waiting for this or any other "magic" solution and should constantly be looking for the right opportunity.
See all our Jerusalem projects and Jerusalem Real Estate.
Contact CapitIL Real Estate Agency.