Bank Hapoalim CEO Highlights Security Budget as Next Israeli Government's Biggest Challenge

At the annual EY real estate conference, Bank Hapoalim CEO Yadin Anavi discussed Israel's current economic and real estate landscape. He noted that the Israeli economy entered the October 7 conflict from a strong position, characterized by low unemployment, low inflation, and low private and public sector leverage. This foundation helped the economy quickly return to business as usual despite the war. However, Anavi emphasized that the macroeconomic outlook has become more complex in recent months, identifying control over the defense budget as the primary challenge for the next government. He stated, "The size of the defense budget will largely determine the standard of living for Israelis in the coming years."

Regarding the real estate sector, Anavi acknowledged a decline in sales, rising construction costs, and high interest rates but stressed that the sector remains stable. He pointed out that banks’ specific provisions have stayed very low for several quarters, indicating the industry's resilience. Anavi identified three key growth areas for the near future: infrastructure projects, data centers, and hospitality. He predicted continued large infrastructure projects regardless of the government in power and noted plans for dozens of new data centers in Israel. Despite security concerns affecting tourism, he expressed optimism about the hotel sector, citing a significant number of entrepreneurs seeking to build new hotels. "What we finance today will yield apartments, offices, and hotel rooms in four to five years," he said.

Clara Tsabargil, head of the real estate sector at Bank Hapoalim’s business division, also addressed the sector’s challenges and opportunities. She highlighted how developers are adapting to changing realities with new project and financing models. Tsabargil noted a return of many companies to office work, countering earlier pandemic-era expectations. She urged authorities to promote converting old office buildings into residential units, especially given difficulties in meeting green building standards. "Such conversions will benefit all parties," she concluded.