The Inevitable Rise in Real Estate Prices in Israel

The real estate market in Israel is about to experience a
new wave of price increases, largely due to an agreement recently signed by the Ministry of Housing. This agreement, relating to housing for people in need, provides for the management and maintenance of social housing by the Amidar organization. This decision, although aimed at improving housing conditions for people in difficulty, could paradoxically exacerbate the rise in prices in the real estate sector.

An Agreement with Unintended Consequences

The agreement signed with Amidar is part of a desire to respond to the urgent housing needs of disadvantaged populations. However, the execution of this agreement involves the establishment of a large-scale institutional rental market. In other words, a significant part of social housing will now be managed by a centralized institution. This approach creates a colossal demand for housing on the open market, as the apartments managed by Amidar will have to be supplemented with additional housing.

The direct consequence of this increased demand is additional pressure on the real estate market. With demand growing faster than supply, housing prices are likely to rise substantially. Property owners and developers, anticipating this skyrocketing price, could respond by increasing their rental or sales rates, thereby contributing to even greater market inflation.

The Limits of Free Market Dependence

Another aggravating factor is the growing dependence on the free real estate market. This approach exposes the sector to significant risks, especially in the event of market instability. According to the observations of some housing experts, the government could have considered more viable solutions to contain costs. For example, investments in the construction of new social housing or in the acquisition of existing housing to convert it into social housing could have offered a more stable alternative.