Year 2021 ended with a significant surge in Israeli housing prices. Throughout the year, which was marked by the economy’s recovery from Covid, housing prices marked an increase of approximately 10%. There are many reasons for this, but as long as at least some of these factors persist—the price hikes will continue deep into 2022.
A 10% annual increase is a significant market event. Beyond the systemic failure of the State of Israel, which has been unable to slow soaring prices for years, this increase highlights a developing trend that pushes the dream of an affordable home further away for many young couples.
Numerous factors have contributed to the rise in housing prices over the past year, including the low-interest-rate environment allowing investors to leverage capital at attractive rates; the failure of the Mechir LaMishtaken program to achieve long-term price stability; the cumulative shortage of land available for construction; the previously lower purchase tax; and various trends driven by the pandemic. The bottom line is that demand has returned and is growing, while supply remains stagnant. This is a nearly certain formula for continual price increases that place a heavy burden on the population.
Whether we like it or not, the reality in Israel is that housing prices are constantly on the rise. This perception drives many to purchase apartments even at high prices, understanding that it is better to buy at today’s expensive rate than to wait for it to climb further. The starting point is the assumption that prices will rise, and apartments are purchased accordingly. Furthermore, the Israeli population continues to grow, which necessitates thinking ahead and planning for tens of thousands of additional units. Attempts to curb prices that focus only on the present create long-term uncertainty, locking the housing industry into an infinite loop.”
Reminder
“Looking ahead, 2022 is set to follow the same upward trajectory as the previous year. As long as demand continues to climb and there are still buyers, countless will be left behind, dreaming of the day when they can own a home without being crushed by an insurmountable financial burden. This reality is a stain on the State of Israel—a national certificate of poverty and unsustainable situation.
The only solution is to stop the battle against investors, who are truly a vital market force generating revenue for the State, and instead, turn the focus toward the supply of land zoned by the government. Greater supply automatically translates into increased construction and lower prices. It may not be a magic solution, but it’s certainly more effective than all other attempts that have been made so far and failed to prove themselves.
Additionally, 2022 is poised to be a turning point for urban revitalization. This momentum is key to expanding the housing supply, elevating living standards, and potentially stabilizing prices that—for now—continue to skyrocket. Current market data shows that buyers are still flocking to the market despite the costs, a trend largely driven by investors and those wishing to upgrade their current residences. For young couples, the solution lies in urban revitalization which creates new inventory while allowing existing residents to remain in their own communities, enjoying homes that have been modernized and expanded.
Pinuy-Binuy has become an absolute necessity that is mandated by our reality, and it is the key to addressing price hikes, elevating quality of life, expanding the housing supply, and replacing hazardous, aging infrastructure. In a country as uniquely challenged as Israel, structural reinforcement and large-scale urban renewal represent the ultimate solution. Our mission now is to execute these visions and lead Israel into a new era of real estate renewal.