Dafna Aviram-Nitzan, Director of the Center on Governance and the Economy at the Israel Democracy Institute notes that “The option for working remotely opens up a window of opportunity for purchasing housing in the peripheral areas of Israel”
Aviram-Nitzan explains: “The rise in housing prices, which reached about 20% in the past year, is expected to slow down in the coming months, in light of the sharp drop in the number of transactions in the housing market. This decrease illustrates that the dream of buying an apartment is rapidly fading into the distance and becoming unattainable for young couples, both those who are not yet homeowners and those who wish to upgrade their current housing situation. Moreover, the report by the Chief Economist in the Ministry of Finance published this week, reveals that an increase in housing transactions was recorded only in the center of the country, and that these transactions were made mainly by those with high-salariesworkers and high-tech employees.
The data also indicates that the hike in the interest pushed low wage earners, whose dream of buying an apartment was already far off, even further away from purchasing a home. This translates into widening gaps between population groups. It is important to understand that the amount needed to succeed in buying a first apartment is so high relative to the average salary, that even if housing prices drop, this will not solve the challenge of buying a first home.
The government should provide additional solutions for populations who face difficulties in purchasing their first apartment, including financial incentives to young couples and those who wish to upgrade their housing conditions to move to the geographical periphery. The fact that today, the option of working remotely is more feasible, opens up a window of opportunity for a growing part of the population to leave areas with a high demand for housing without having to quit their jobs, even when their jobs are located in the center of the country. The more that people take advantage of this opportunity and purchase an apartment in the periphery, the more likely it is we will see slowdown in apartment prices in areas of high demand in the center of the country.
In addition, a move to the periphery would also support a greater spread of the population, development of the periphery’s economy, a reduction in road congestion, and a decrease in the burden on the infrastructure in densely populated areas in the center of the country. In addition, encouraging apartment purchases outside high-demand areas i, could increase the supply of available apartments for rent in these areas, thus restraining the increase in rental prices and helping young people who are not yet able to purchase a home, to find an apartment for rent in these areas at more reasonable prices than those offered today.
To this end, government grants based on geographic location, which currently range between NIS 30K to 60K, must be significantly increased. The current amount does not provide the initial capital required to purchase a first apartment. Additionally, the government should consider expanding the number of local authorities in which home buyers are eligible to receive the grant, (which currently stands at about 29).
In addition, it is necessary expand the number of apartments that are up for sale through the "discounted apartment" lottery program, intended mainly for non-homeowners, and, under certain conditions, for those who wish to upgrade their housing conditions. Today, the program grants lottery winners a discount of about 20% of the price of the apartment or NIS 300,000-- whichever is lower.