Israeli Real Estate Leaders Blame Government for Soaring Housing Prices

Senior figures in Israel's real estate sector have pointed to government policies as the primary driver of high housing costs, despite a slowdown in the market. At a recent conference, Tzachi Didi, CEO of Aviv Melisron, stated that the state is the number one factor in apartment prices. He argued that without changes to land marketing methods, reduced bureaucracy, and increased foreign worker quotas, significant price drops are unlikely.

Didi highlighted that the construction process itself is now faster than obtaining permits and land, with developers facing lengthy delays and high financing costs, especially with current interest rates. He suggested delaying land payments until developers actually take possession of the plots to alleviate financial burdens.

The sector is also grappling with a severe labor shortage, exacerbated by the departure of Palestinian workers after October 7th. This has led to increased construction costs, longer project timelines, and higher overheads. Experts predict at least another difficult year for the market, urging companies to manage their cash flow carefully.

Despite challenges, credit to the construction and real estate industry continues to grow, with bank credit for residential construction alone jumping 40% in the past year. However, the market is becoming more selective, with lenders scrutinizing projects and developers more rigorously. Non-bank credit is also playing a role, often serving as a complementary funding source.

While acknowledging a rise in canceled deals, bank representatives emphasized that the majority of transactions are still being completed, particularly for owner-occupiers. The long-term rental market was also identified as a potential growth area, with calls for the state to release more land for institutional development to provide a stable alternative to homeownership.