The Israeli Residential Market

Netanel Lapidot Senior Department Manager Strategy & Policy Planning

This presentation may not be used for any purpose without direct, written permission from The Ministry of Construction and Housing June 6, 2016 Agenda 2

1. Residential Market Overview

2. Government Policies and Programs within the Housing Sector

3. Construction potential in RESIDENTIAL MARKET OVERVIEW Characteristics of the Residential Units 4

Existing 2.457 m Anticipated types of residential units residential units over the next decade

Single Single Family units 10 Stories Family units 39% and 29% High density 28% units 61%

3-6 Stories 4-7 Stories 15% 28%

2.582m Households Potential of 1m units Israel’s Housing Shortage: Causes and Triggers 5

Source: Israel’s Central Bureau of Statistics, 1995 & 2008: Population Census, 2014: Labour Force & Construction Completion Surveys Housing Construction and Population Growth 6

Housing Units

Source: Central Bureau of Statistics, Project Groundbreakings and Completions Production Process 7

Land ownership Private 7%

State 93%

Government goal: 60,000 unit groundbreakings each year

The Apartment Production Process

Zoning Evacuation Infrastructure Permit Construction GOVERNMENT POLICIES AND PROGRAMS WITHIN THE HOUSING SECTOR Residential Units Approved by the Planning Authorities 9 2015 Nationwide Residential Units 100,000 Units 100,000 99,514 North 10,459

Haifa 11,209 75,368

62,553 63,467 Center 20,251

Tel Aviv 25,420

Jerusalem 11,651 32,462

23,749 24,630 23,409 24,506 South 20,524

* North Center Jerusalem

Source: Interior Ministry, Annual Report 2014 *2016 Development Targets Vacating IDF Bases 10 Development of 100,000 Units 30,000 Israel Military Industries

17,000 Sde Dov

IDF Bases 12,000 Sirkin 60,000 Units

1,000 “HaKirya” 1,200 "Shalishut”

Defense Industries 20,000 Tel HaShomer 40,000 Units

17,000 Tzrifin North IDF bases and defense industries in Center central Israel Jerusalem Transportation Infrastructure for Residential Projects 11 Transportation projects Roads and Budget (According to the State Budget) (Million NIS) which support residential development

The (BRT) Extension

Highway 6 Extension

531 + HaSharon Railway

Tel Aviv

Jerusalem Light Rail Extension

Ashkelon Beer Sheba Railway

North Center Jerusalem Framework Agreements 12 Nationwide 210,000 Units

Municipality Developers Development Infrastructure Costs & Timeline License & Permits 34,000

Planning Certainty Center 108,000 Cooperation Transparency Jerusalem 8,000 Residents Government Educational and Increased Housing Stock Public Facilities Accelerated Development South 57,000 High Demand Areas

North Center Jerusalem Urban Regeneration 13 Nationwide PINUY BINUY TAMA 38 Potential 810,000 Units Demolition of old buildings Expansion and for urban potential of 10,000 new housing units and intensive new reinforcement of old renewal per year construction buildings

North 55,000

Haifa 155,000

Center 410,000

Jerusalem 105,000

South 85,000

North Center Jerusalem The “Resident“Residential Price” Price” Plan Plan 14 Tenders Nationwide In 2015-2017 all land tenders will be published 30,000 Units subject to the “Resident Price” thus far Of 100,000 Government goal

● Can be sold only to non-home owners – by North 4,000 lottery Haifa 7,000 ● Price reduction of at least NIS 50,000 as Center 7,500 compared to market prices.

● Construction according to uniform Jerusalem 5,000 specifications. South 5,500

North Center Jerusalem Rental Market 15 International Comparison - Percentage of Rentals

60.0 28.8% 40.0 20.0

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Italy

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ליטא

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כיה

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ספרד

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צרפת

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מלטה

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לטביה

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איטליה גרמניה

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Iceland

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Finland

Estonia Norway

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Portugal

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Denmark

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לוקסמבורג

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Luxembourg Czech Czech

Policy measures to Encourage Concern long term rental market

■ Publishing state tenders ■ Purchase of entire buildings ■ New zoning is directed to rental housing ■ Tax benefits and building rights for rental projects ■ Additional 20,000 Student dormitories beds

Note: The above statistics do not include Kibbutz housing or units rented from family members and close friends. Source: Central Bureau of Statistics, National Social Survey, 2013; Survey data processed by Paz Group CONSTRUCTION POTENTIAL IN ISRAEL Residential Units Under Construction 17

Residential Units

Source: Central Bureau of Statistics, Construction in Israel Residential Market Needs 18

40,000 Units

27 Months Summary & Call For Action 19

Demand for residential units

Shortened Need for construction housing period prices reduction Opportunity for Foreign construction Increased companies Government construction Support capability and actions

Diverse residential market Thank you