Bank Leumi CEO: Bureaucracy adds 10% to housing prices

“In the current interest rate environment, the cost of unnecessary bureaucracy, which has grown in recent years already accounts for almost 10% of the price of an apartment,” Bank Leumi CEO Hanan Friedman told senior real estate industry officials, ahead of the opening of Globes and Bank Leumi Israel Real Estate Conference in Tel Aviv. He reiterated, “A solution for unnecessary bureaucracy and returning it to sane proportions will lead to a cut of about 10% in apartment prices” – including for the benefit of young couples.

Friedman warned that if no solution is found to the challenges facing the real estate industry following the war with Iran, it could turn into a real social crisis. Friedman explained that he was referring to the shortage of land for construction, population growth, and demand for apartments that far exceeds supply. He also pointed out that Israel lacks tens of thousands of apartments at every stage, and in the past two years there has been a persistent shortage of construction workers.

The main problem cited by the Leumi CEO is the lengthening of construction times, which he called “impossible bureaucracy.” This, he said, causes the planning, construction, and licensing procedures to take much longer than is reasonable. He said, “From the moment the land is bought until work begins, and from that moment until the project is completed – the time is getting longer at a dizzying pace. Until a year ago, the average time was about 31 months, compared with 25 months in the years before that. In the past year, the average time has jumped sharply to more than 36 months.”

Friedman praised the Bank of Israel, which he believes is leading “informed and responsible policy.” He noted that the regulation issued by the central bank at the beginning of the year led to a reduction in demand from speculators, and that the bank’s policy has saved the economy since Covid and following the war.

Friedman insisted that the government must also act. “It is convenient to leave the responsibility for solving the core problems of the economy to the Bank of Israel, but the government really needs to take effective steps. Just as bringing the debt-to-GDP ratio to its rightful place is the government’s responsibility,” he said.

According to him, the solution that is the state’s responsibility is to bring the periphery closer to jobs by upgrading the transport infrastructure, and developing employment centers in the periphery as well.

“Many board a train in Haifa or Beersheva, travel for about an hour plus and arrive at their workplace in the center of the country. They feel comfortable living in the periphery,” Friedman said. “If the transport infrastructure is upgraded even further, and the distance from the geographic periphery to the commercial and employment areas in the center is significantly shortened, I am sure that more and more people will move to live in the north or south and will boost the real estate market there as well.”

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However, Friedman noted that this is a medium- and long-term solution, and therefore the government must begin and act as soon as possible to implement it.

“We must shorten the bureaucracy in order to accelerate the reconstruction work from the war”

In the immediate term, the main problem that Friedman identifies is what he called “Impossible delays in the planning, construction and licensing procedures.” This problem must be treated at its roots,” he said. “That is, putting their hands into their pockets and encouraging developers either by the state directly or through local authorities.” Friedman called on the government to provide incentives and tax exemptions, which will be conditional on developers completing projects in shorter times than planned.

Leumi’s CEO added that local authorities should also be encouraged to shorten the planning and licensing procedures. “But motivation is not enough. We also need a stick for the parties that create unnecessary delay and bureaucracy,” he stressed. “These parties must pay the price for the delays they create.”

Friedman called for adopting standards of commitment to providing service among planning agencies, and estimated that the move would also reduce cases of corruption in local government. “Such a model would also give developers economic certainty. In other words, smart partnership between developers and the state. Creating joint incentives, in a way that balances profit considerations with burning social needs.”

According to Friedman, the immediate need to cut bureaucracy has increased following the widespread destruction of buildings in the war with Iran. “We must cut bureaucracy in order to speed up the reconstruction work from the war, and thus also bring about a decrease in housing prices,” he said.

If no steps are taken on the issue, Friedman warned, a major jump in housing prices can be expected. According to him, “In areas where thousands of apartments were damaged, rental prices have already increased by tens of percent. They are expected to rise sharply again in the near future because of additional urban renewal projects that are getting underway.”

Leumi’s CEO added and warned that without immediate steps, the rents hike will bring back to the market the investors who took themselves out of the market in 2023. “In order for the housing crisis not to reach the dimensions of an irreconcilable social crisis, all parties need to come together and decide together on the steps in the industry for the coming years.”

At the end of his remarks, Friedman mentioned the 50 hostages who are still being held captive by Hamas: “We all hope for their speedy release. There is no greater good deed than that,” he said.

Full disclosure: The conference was held in cooperation with Bank Leumi and sponsored by Mivne Group, Shikun and Binui, Solel Boneh and the Fischer law firm. (FBC)

Published by Globes, Israel business news – en.globes.co.il – on July 22, 2025.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.