It is a known fact that home prices are on a worrying rise. It is known that demand is greater than supply. It is known that contractors are facing a sharp increase in construction costs. But more importantly, it is not known where this increase is going to reach the stopping point. Moreover, there is no mistaking the fact that few serious political efforts have been set in motion to alleviate the situation. However we shall examine two moves that are already underway, moves that seek to impact the real estate picture. Have they helped? What can we expect next, and bottom line, who’s benefiting from them? We set out to investigate!
The effect of the "discounted housing plan"
Starting off with the “discounted housing plan,” a recent “discounted housing plan” (4.22) has been launched with a lottery of 10,000 affordable apartments, scattered in 31 localities across the country, with additional lotteries on the table. The plan was launched in the wake of the drastic price increase, if only due to three years of political instability; however, those who expect significant changes may be disappointed, since one cannot overestimate “bureaucracy’s ability” to slow down important processes such as these.
At what price will the word be spread - apartments at a discount?
The overall conception of a “discounted housing plan” is quite simple. It seeks to help as many eligible couples as possible to succeed in purchasing an apartment, with the overarching goal being to influence market prices.
An explanation? Well, once more couples get to buy apartments at a sane price, it makes it harder to charge exorbitant prices for new apartments on the market. Therefore, they chose to include in the lottery apartments that have yet to receive building permits, with the understanding that while more couples might have to wait longer to realize their dream, still, more couples will realize that a large number of discounted apartments are available, so it is worth the wait. It is also interesting to note that some of the apartments are not only in peripheral areas, but also in Tel Aviv and Jaffa, where several dozen apartments are included. How so? Well, some of the apartments that participate in the current lottery are left over from the previous program, the “Price for an Occupant ” program.
What do the contractors think of the discounted apartment plan?
Contractors in the field indicate that the current plan is considered good, for a number of reasons. First, it entails a discount of about NIS 300,000, an amount that is both significant, and that also leaves room for profit. Second, care is being taken to ensure that each lot will be awarded to a different winner, so there is no need to fear that a monopoly might develop, which means that healthy competition between the developers can be expected to lead to a welcome recession in prices.
To what extent does the program to increase purchase tax bear influence?
In November 2021, purchase tax for investors was increased by 8%. In this case too, the aim was to bring calm to the situation in the market. This move led to some moderation, and the cities in which the most new apartments were purchased were Tel Aviv, Bat Yam, Jerusalem, Netanya, Rishon LeZion, Ramat Gan, and Beit Shemesh in that order.
Bottom Line – Real Estate Snapshot
That said, raising purchase tax is not expected to significantly impact the situation. This is because people understand that investing in real estate is still the best investment at the moment. Moreover, many are afraid to delay the purchase of an apartment – fearing that prices will only continue to climb; therefore, they are willing to absorb the tax increase.
Hence, while it is possible to benefit from the moderation in demand for some time, this is not a measure that can be relied on. It is also important to understand that we as Israelis are not great believers in rental, and prefer to purchase an apartment, even if at considerable expense. Additionally, people understand that an apartment is an ideal asset for investment, and since the situation is not really expected to change in the coming years, demand is expected to continue to be high, even considering the intervention of the two current moderating moves.
