Experts see no drop in property prices despite government efforts

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The Central Bureau of Statistics said last month that average house prices rose 5.6% over the past year, while Housing and Construction Minister Zeev Elkin said prices will continue to rise even more dramatically in the coming year.

Despite high prices, Israelis are buying houses in record numbers, and mortgage borrowings hit a record high of NIS 11.6 billion in June, and there are no signs of slowing growth.

In light of this, the new government has made lowering the cost of housing one of its key goals.

Everyone agrees that the main reason for high prices is lack of supply housing in the housing market. The government has set a target to add 300,000 units, although just over 50,000 units are approved annually so far. Finance Minister Avigdor Lieberman said Israel needs to build 75,000 new apartments a year to balance the property market.

At the same time, the Ministry of Finance has neither a target price level, nor a forecast for the housing sector. “Our goal is only to restore the balance between supply and demand,” said Ram Belinkov, General Director of the Ministry of Finance, recently. “Any attempt to artificially lower prices will not be a serious reaction.”

Bad management in Land Office of Israel (ILA), the government agency in charge of land administration in Israel, is widely accused of lack of development. Other bypass options are being explored, and Lieberman is putting forward a controversial plan to convert tens of millions of square feet of unused office space into residential buildings for new housing options.

City renovation projects also add a small number of new units in cities, but will they do something?

“I don’t think the government’s role is to try to regulate prices,” said Professor Danny Ben-Shahar, director of the Institute for Real Estate Research. Alrova at the Koller School of Management, Tel Aviv University.

“The laws of supply and demand are working. But the government has two responsibilities here: to free up land for construction and to ensure fairness, transparency and democracy in the construction process. If the government can free up enough land, the market will regulate itself. The question is whether the government can do it. ”

Ben Shahar believes that the shortage of homes in major cities in Israel will go a long way toward maintaining prices. “I don’t like to predict, but in Tel Aviv, it doesn’t look like demand will be met by supply anytime soon,” he said.

“Israel is not one fixed unit. It has many different areas with different needs. People want to move to the center, but there is practically no new building. On the periphery of the country there are open spaces for construction, but I believe the deficit in the central region will lead to higher prices there too. “

The opposite scenario, in which housing prices in the periphery fall and, in turn, leads to lower prices in areas with high demand, is much less likely. “It will be difficult to meet this demand for a long time,” Ben-Shahar said.

Ben Shahar added that recent changes in mortgage rules and tax law stimulated more buyers to enter the market. Other analysts point out that with so much of the economy invested in the real estate market, there are far more people interested in keeping prices high than in letting them fall.

Allon Dahan, owner of Society Real Estate in Tel Aviv, is also skeptical that prices in Tel Aviv will ever fall. “There is no room for new apartments here,” Dahan said. “There hasn’t been such a rise in prices for 40 years. In the near future, prices will not fall here. In the long run, we cannot know. “

A similar picture is emerging in Jerusalem, Israel’s largest city with nearly a million inhabitants. “In 20 years, there will be 1.4-1.5 million people living here,” said Yoel Even, Jerusalem’s city engineer, talking about the city’s master plans. “I do not know how the market will react to all ongoing urban renewal projects, but I am sure that the more we build, the more demand there will be. Jerusalem is the largest city in Jerusalem and that won’t change. “

Nachi Paris, a senior real estate agent at Jerusalem-based Nachi Realty, agreed. “The demand far exceeds the supply. Despite the fact that a lot is being built, the construction of, say, 30 new buildings with 500 new apartments will not be able to meet the demand, ”he said. “People my parents’ age want to retire to Jerusalem, and people who come from the US and Europe want to shop in the city. I now advise my clients to buy used apartments rather than new projects under construction, because the rise in the cost of building materials means you can pay 10-15% more for a project that will be ready in five years. I don’t know how things are in the rest of the country, but prices in Jerusalem are not going down. ”



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