Israeli media reports that Israel's budget for 2024, which is currently being prepared, includes a program to revive the demand for apartments and properties in the southern peripheries near Gaza and the northern outskirts near Lebanon, from which residents have been evacuated due to fears of resistance attacks.
Plan Cost
In the latest development of the program's deliberations, the Israeli newspaper "Jerusalem Post" reported that the Director General of the Israeli Ministry of Finance, Shlomi Heisler, has distributed the plan to solicit feedback from officials of the Ministry of Construction and Housing and the Israel Land Authority, with the aim of incorporating it into the new budget.
The plan is estimated to cost 1.2 billion shekels (approximately $331 million) annually. It is designed to reduce the prices of new apartments for qualified individuals in the regions near Lebanon and Gaza. For instance, the cost for an apartment with four rooms is expected to be 800,000 shekels (around $220,000), with benefits lasting for two years after the war.
Resistance rockets have made the Gaza periphery an undesirable place to live for Israelis (Anadolu Agency)
Incentives
The discount on these apartments will be applied through "zero-pricing of land," meaning that the land will be provided for construction at no cost, coupled with additional subsidies for veterans.
It is worth mentioning that Israel has previously offered land at zero cost in remote areas, but these did not attract much interest due to high development fees and construction costs.
The plan also includes a 2% reduction in land purchase tax for contractors who succeed in building quickly using accelerated planning and construction methods.
What surprised the newspaper was that the program also proposes the revival of the "failed" idea, as described by it, of pairing foreign construction companies with their workforce to address the shortage in available labor. Another idea presented was offering government-guaranteed loans to contractors to stimulate construction.
Industry Slump
A recent report released by the Israeli Ministry of Housing revealed a 15% decline in new construction operations, indicating a recession in the real estate market that has impacted both supply and demand.
Data from the Israeli Central Bureau of Statistics shows that while demand for both new and existing apartments continues to steadily decrease, the supply side is also at a complete standstill, with a significant drop in construction activities. In October 2023 alone, the number of apartment transactions declined by 54% compared to the same month in 2022, a statistic that Jerusalem Post considers concerning.
The report indicates that from October 2022 to September 2023, there were 61,620 apartment starts, a decrease of 14.4% on an annual basis. However, the total construction work, after subtracting demolished apartments, amounts to about 57,650 units.
The newspaper noted that these figures do not fully reflect the impact of Operation "Flood of Al-Aqsa" and the war on the Gaza Strip, which has led to an even greater slowdown in the construction and building sector since October 7 last year.
