In late October 2021, the Israeli Government announced an ambitious plan for the housing sector. The proposed plan for 2022 to 2025 highlights the Government’s aim to increase the apartment supply rapidly and tackle the Israeli housing crisis.
The Government hopes that this will help curb the Israeli housing crisis spiraling in the country and reduce prices. The program will help to initiate the construction of 280,000 homes. During this period, it also aims to approve another 500,000 homes. The forecasted cost of the project is more than $ 5 billion.
A combined plan drafted by the various ministries included the ministries like Interior, Housing and Construction, and Finance. They set several developmental and planning goals for the Government. The plan is at par with the funding included in the national budget.
The government Ministry put forward their plan to a joint statement stating they move to cut short the bureaucratic process. The interdepartmental liaison will help to recondition Israel’s real estate landscape. They believe it will lead to lower prices in the short term.
A significantly higher number of homes is part of the Government’s construction plan compared to recent years. The target of 280,000 homes is set for the next four years only. Tenders for 300,000 homes on state-owned land are already underway, out of which 50% are already successful.
The Modus Operandi
The Government has also put forth its idea of reaching those goals through reforms. Reducing bureaucracy in general concerning the housing projects is a prime agenda for the Government.
The above policy is particularly applicable for the unique housing projects, like those demolishing the old buildings to construct new ones in their place and those converting offices to residences.
The Government also plans to reduce taxes for residences built on private land and increase the investor’s residence purchase tax to 8%.
The government ministries also advised stopping the use of private homes for business in central Israel. However, kindergartens are not part of this list. A ban on the use of private residences as hotels and vacation rentals is also in place.
The plan aims to invest $ 2.5 billion or NIS 8 billion to develop drainage, transportation, and sewerage infrastructure. There is a corpus for the development of schools and kindergartens amounting to $ 1.75 billion or NIS 5.5 billion.
A specific budget of $ 630 million or NIS 2 billion is part of the plan to remove hurdles and develop new homes for the Arab community. Construction permits approval and issuance by the Municipalities also has a budget allocation of $ 202.6 million or NIS 640 million.
Buying a house in Israel has a steep cost and prices skyrocketed in recent years. The average price of a four-room house in Israel during the mass protests in July 2011 was about $402,777 or NIS 1,450,000.
The average price of a four-room house in Israel in June 2021 is about $682,608 or NIS 2,200,000. This data obtained from research at Tel Aviv University depicts a 69% jump over the last ten years.
Around 30% of the home purchases in 2016 were for investment purposes only. Ownership of two or more houses among the Israelis grew from 2% in 2008 to 10.5% in 2021.
Another critical aspect is the changing weather conditions. The expected temperature rise due to global warming in Israel is higher than the global average. The Government is keeping a close tab on the same as an increase in temperature all the rain storm strength will need new preparations.
You can find more about the fluctuations in temperature and climate conditions in Israel by checking the weather in Tel Aviv tomorrow, the coming week, and the entire month. The preparedness of local authorities to have resilient ecosystems and proper infrastructure in place is the need of the hour.
Affordable housing can help keep a chunk of the population clear of flooding, especially in the cities. The cities see more floods as not much land gets exposed, so water cannot seep into the ground.
Therefore, the Government of Israel’s ambitious plan will spur some demand in the economy across various sectors. However, the exact impact on the real estate sector and the efficacy of the plan to meet the desired output will be clear only in the days ahead.
It is worth mentioning that under the prevailing condition of housing in Israel and a major chunk of the population facing fears of wrath of nature, any initiative to curb the housing crisis is commendable.