With the election over, Israel’s property market is once again waiting for the policies that will follow. But projects that take years to complete cannot depend on promises that last only until the next minister takes office.
The incoming government should put a stable framework for planning, building permits, and property taxation into law, allowing developers and buyers to plan beyond a single term.
Israel’s election is over, and the property market is already waiting for the next government’s decisions. After a period of war, disruption to economic activity, and slower home sales, expectations are clear: measures that will bring buyers back to sales offices and developers back to building sites.
Interest rates are also on the market’s mind. On October 21, the Bank of Israel kept its policy rate at 3.25%, leaving the market waiting for further easing. Yet even if borrowing becomes cheaper, the next government will still need to answer a fundamental question: How long can people rely on the policies it adopts?
Israel is already familiar with most of the proposals likely to be put forward: a cabinet committee on housing, reforms to the building permit process, more flexible planning rules, tax incentives, and subsidized land. The ideas have been drafted, the plans presented, and the promises made.
In my view, the central failure is that the rules can change while a project is underway, whenever a government, coalition, or minister is replaced.
A property development does not begin and end between elections. Buying the land, securing planning approvals and building permits, arranging finance, and completing construction take years. Developers must commit money and agree to schedules long before selling the final apartment.
Buyers enter transactions that may shape their finances for decades. Both need to know which framework they can rely on, and what will happen to commitments they have already made if the state changes direction.
When policy is seen as temporary, even a carefully prepared business plan becomes a bet on the next government decision. Changes to permit procedures, subsidy terms, or tax rules can alter a project’s financial viability. That uncertainty can delay decisions, require a larger financial cushion, and sometimes lead developers to abandon a project.
Ultimately, buyers may also bear the cost of the additional risk.
In my work with Israeli investors and developers in international markets, I see regulatory stability as a major factor in deciding where to invest. Romania, Portugal, and Cyprus also change their laws and taxes. No market offers complete certainty. The lesson for Israel is the need for a framework that investors can understand in advance and rely on, with clear arrangements for the transition from one policy to another.
The next government's housing responsibility
Israeli capital has a choice about where to go.
When investors compare a project in Israel with one abroad, they also consider whether they will be able to carry out the plan they have prepared. A higher projected return can lose its appeal if every political change requires the transaction to be reassessed. Sometimes it makes sense to accept a lower return in exchange for a better ability to anticipate the conditions under which the investment will operate.
The next coalition agreement should therefore include a commitment to put a stable framework for planning, building permits, and property taxation into law, and to establish in advance how that framework can be changed. The government should specify which rules will continue to apply to projects already underway, how much notice will be given before a change, and how much time those who have already committed under existing policies will have to adjust.
Legislation cannot guarantee that no future parliament will ever change anything. Nor should a policy that proves mistaken remain frozen forever. But it is possible to reduce reliance on individual ministerial decisions and make substantial changes part of a more orderly, transparent, and predictable process.
A government is entitled to choose a new direction. It should explain how that direction will be implemented and what will happen to those who acted under the previous rules.
This should be a priority at the start of the next government’s term: advance the necessary legislation within one to two years, with a public timetable and clear responsibility for delivery. The test will be whether developers can plan projects and buyers can understand the terms of a purchase without having to base their decisions on a guess about who the next minister will be.
Regulatory certainty alone will not resolve the property sector’s difficulties. It cannot replace action on planning bottlenecks or financing costs. But every new policy depends on the ability to implement it over time. If the state wants capital to remain in Israel and finance new homes, it must give those making commitments for years ahead a stable basis on which to act.
The next government can establish another housing committee and announce another plan. Its responsibility is to ensure that housing policy can survive the next change of minister. Building homes takes longer than a single term in office. The policies that make construction possible should be designed with the same timescale in mind.
The writer is a former MK and member of the Economic Affairs Committee, and an expert in global real estate investment.
Follow us on GoogleSource: The Jerusalem Post · ILAN LEIBOVITCH
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