107,000 people did not win a discounted apartment: the harsh reality ahead

1. Congratulations to the 20% of reservists who participated in the discounted apartment program and received a notification this week: you won an apartment. Congratulations also to the 107,000 people who did not win the lottery and received a less happy message: sorry, we have no apartments for you — go buy on the free market or wait for the next lottery. And final congratulations to the thousands of ultra-Orthodox, who did not serve in the IDF, were not part of the lottery, and now must look for an apartment on the free market.

This week, the State of Israel effectively absorbed 100,000 more people in need of a roof over their heads. They are at home listening to the news, which claims there are 84,000 unsold apartments (forgetting to mention that only 16,000 are ready), that contractors are collapsing like a house of cards (though no major public construction company has gone bankrupt), and that the Ministry of Finance is warning of a wave of deal cancellations (despite data showing no surge compared to peak years).

The real estate market is slowing down, becoming a buyer's market, yet the outlook is concerning: the state is marketing less land, demand remains high, and contractors are surviving through stock market offerings and fundraising.

What to do now? Smotrich and Yehuda Eliyahu (PR, Gili Yaari / Flash90)

Here are the real numbers: 100,000 people looking for an apartment, and only 16,000 ready for occupancy, some in Tel Aviv — a city where most discounted apartment "refugees" cannot afford to buy. If anyone had any doubts, there is no doubt left: this is likely the best time to buy an apartment.

1. "The Israel Land Authority needs to be dismantled and rebuilt. The next CEO of the ILA is a drama. His identity has dramatic significance," Minister of Finance Bezalel Smotrich stated in February.

This quote was a planned move. Smotrich did not want to strip the Authority of its assets; he wanted to replace Yanki Quint, who was successful in the role. Since then, he has been busy making his associate, Yehuda Eliyahu, the head of the Authority. To the misfortune of apartment buyers, this has become the Authority's main preoccupation.

Smotrich succeeded in the first part — he managed to "dismantle" the ILA, which has failed to market enough tenders for the free market since the beginning of the year. The second part, rebuilding the Authority, is delayed. The appointment of Eliyahu has failed repeatedly since June. After the ILA lowered threshold requirements, the committee is meeting again to decide if he is worthy. While the Authority is busy with management politics, land marketing has stalled.

1. After a long silence, 11 real estate tenders for high-density construction closed this Wednesday. It sounds like a nice number, but 7 are "Target Price" tenders, and one focuses on rental housing. These are subsidized tenders where prices are 25% lower than market rates, and rents are about 20% cheaper. Is this what the market needs, or just what the ILA is capable of providing?

We have warned about this: the Authority knows how to market plots for discounted apartments but provides no solution for the free market. If this continues, in 5 years we will have a market saturated only for reservists. What about the public that did not win the lottery? They will try to "lottery" money from their parents or continue renting. They were told this was the best option in 2021, yet housing prices have risen by 30% in two years and have not dropped significantly even during the war.

Blessed is the believer.