Housing Minister: Conditions Ripe for Price Drops, Market Has Shifted

The Israeli housing market has changed, creating conditions ripe for a decrease in apartment prices, according to Yehuda Morgenstern, Director General of the Ministry of Construction and Housing. Speaking at the Globes Israel Real Estate Conference, Morgenstern stated that the market dynamics have shifted significantly since before the October 7th attacks, with increased housing supply and the ability of developers and banks to absorb current prices. He urged contractors and banks to offer different prices to the public, noting that official statistics and public company reports indicate a decline in prices.

Morgenstern also addressed taxation, advocating for the addition of a tax on rental income from the first shekel, while reducing the purchase tax. He believes a property tax on land should be reinstated, along with a tax on third apartments, especially if land property taxes are reintroduced. These measures, he argued, would help balance state tax revenues and manage the growing deficit.

Discussions at the conference also touched upon the purchase tax on additional apartments, set to expire in February. Morgenstern firmly believes the tax rate should not be lowered, citing a significant increase in housing supply planned for 2024-2026, with around 78,000 housing starts expected in 2024. However, Moshe Abutbul, Director General of the Tax Authority, indicated that the decision on purchase tax for investors is more of a housing policy issue than a fiscal one, and the Tax Authority's primary role is revenue generation.

Other participants included Rafi Elmaliach, Director General of the Planning Administration, who noted that over 1.3 million housing units are approved in urban building plans nationwide, and efforts are underway to streamline the permitting process. Carmit Yulis, Deputy Attorney General for Civil Matters, discussed ongoing reforms, including potential changes to betterment levies, aiming for more certain and streamlined taxation models.