The Israeli Residential Market Daniela Paz Erez Paz Group Founder & CEO This presentation may not be used for any purpose without direct, written permission from Paz Group, Ltd. G721001 May 9, 2016 consulting 2 Paz Group ■ Paz Group is Israel’s leading real estate consultancy (According to Dun’s 100). ■ With nearly 20 years in the industry, Paz’s expertise spans all real estate sectors, including property appraisals, construction loan monitoring, urban planning, economic research & business consulting. ■ The company has supported thousands of projects in the private and public sectors, including the monitoring of tens of thousands of housing units and advised on the most complex and critical national development projects in Israel. ■ Among Paz’s customers: government ministries, local municipalities, banks, real estate entrepreneurs, developers and contractors. consulting 3 Agenda 1. Residential Market Overview 2. Government Policies and Programs within the Housing Sector 3. Construction Potential in Israel consulting RESIDENTIAL MARKET OVERVIEW consulting 5 Characteristics of the Residential Units 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 up Multi-family 29% 28% units 61% 3-6 Stories 4-7 Stories 15% 28% 2.582m Households Potential of 1m Units consulting Source: Central Bureau of Statistics and data analyses conducted by Paz Group Ltd. 6 Israel’s Housing Shortage: Causes and Triggers Source: Israel’s Central Bureau of Statistics, 1995 & 2008: Population Census, 2014: consulting Labour Force & Construction Completion Surveys 7 Housing Construction and Population Growth Housing Units Housing Starts Project Completions consulting Source: Central Bureau of Statistics, Housing Starts and Completions 8 Housing Prices NIS (thousands) Source: Central Bureau of Statistics, Housing Sales Records and data analyses conducted consulting by Paz Group Ltd. 9 Production Process Land ownership Private 7% State 93% Government goal: 60,000 unit housing starts each year The Apartment Production Process Zoning Evacuation Infrastructure Permit Construction consulting GOVERNMENT POLICIES AND PROGRAMS WITHIN THE HOUSING SECTOR consulting 11 Residential Units Approved by the Planning Authorities 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 South Source: Interior Ministry, Annual Report 2014 consulting *2016 Development Targets 12 Free Up Land of IDF Bases 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 North 17,000 Tzrifin Center Jerusalem IDF bases and defense industries in South central Israel consulting Source: Government Resolution 2392. 13 Transportation Infrastructure for Residential Projects Transportation Projects Roads and Public Transport Budget (According to the State Budget) (Million NIS) which support Residential Development The Metronit (BRT) Extension Highway 6 Extension 531 + HaSharon Railway Tel Aviv Light Rail Jerusalem Light Rail Extension Ashkelon Beer Sheba Railway North Center Jerusalem South consulting Source: Ministry of Finance, State Budget 2015 14 Framework Agreements Nationwide 210,000 Units Municipality Developers Development Infrastructure Costs & Timeline License & Permits Haifa 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 South consulting Source: Israel Land Authority and Paz Group Ltd. 15 Urban Regeneration Nationwide PINUY BINUY TAMA 38 Potential 810,000 Units RAZE AND REBUILD Expansion and for Urban Potential of 10,000 New Housing Units Demolition of old buildings reinforcement of old Renewal Per Year and new construction of buildings increased density North 55,000 Haifa 155,000 Center 410,000 Jerusalem 105,000 South 85,000 North Center Jerusalem South consulting Source: Data analyses conducted by Paz Group Ltd. 16 The “Resident“Buyer’s Price Price”” Plan Plan Tenders Nationwide In 2015-2017 all land tenders will be published 30,000 Units subject to the “Buyer’s 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 $50,000 as Center 7,500 compared to market prices. ● Construction according to uniform Jerusalem 5,000 standards. South 5,500 North Center Jerusalem South consulting Source: Israel Land Authority analyses conducted by Paz Group Ltd. Rental Market Rental ■ ■ ■ ■ ■ Additional Additional T New zoning is directed Purchase Publishing ax benefits benefits and 20.0 40.0 60.0 Policy Measures to Encourage the Long Term Rental Market Rental Term Long the Encourage to MeasuresPolicy 0.0 of entire state state tenders International שוויץ Switzerland 20 , גרמניה Germany 000 צרפת France building rights for rental projects Student Student consulting דנמרק buildings Denmark .ארה"U.S.Aב הולנד to rental to rental housing Netherlands dormitory dormitory Luxembourg Comparison לוקסמבורג 28.8% EU האיחוד … Note: The above statistics do not include Kibbutz housing or units rented rented friends. or and members units Kibbutz close The do housing family fromabove Note: include notstatistics Israel ישראל Source: Central Bureau of Statistics, National Social Survey, Survey, Social Bureau National Central Statistics, of Source: Cyprusקפריסין פינלנד beds Finland Italy איטליה פורטוגלPortugal - יוון Greece Percentage סלובניה Slovenia איסלנדIceland ספרדSpain צ'כיה Czech Republic Latviaלטביה Estonia אסטוניה of פולין Poland 2013 Malta Rentalsמלטה ; Survey Survey data processed ;by Paz Group נורווגיהNorway בולגריהBulgaria Slovakia סלובקיה הונגריה Hungary ליטא Lithuania רומניה Rumania 17 CONSTRUCTION POTENTIAL IN ISRAEL consulting 19 Residential Units Under Construction Residential Units consulting Source: Central Bureau of Statistics, Construction in Israel 20 Residential Market Needs 40,000 Units 27 Months consulting 21 Summary & Call For Action 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 consulting Thank you Paz Group - Real Estate Consulting 2 Ha-Menofim St. P.O Box 12305 Hertzliya Pituach 46728 Israel Tel +972 9 9700800 Fax +972 9 9700801 [email protected] www.pazgroup.co.il consulting.