The head of Israel’s National Economic Council has recommended curbing banks’ ability to influence apartment pricing in a move aimed at reducing housing costs and easing the country’s growing surplus of unsold homes.
Avi Simhon, who chairs the committee examining bank involvement in real estate, said in an interview with Ynet that banks should be barred from restricting developers’ ability to lower prices once a financing agreement has been signed. Currently, many financing contracts require developers to obtain bank approval before offering discounts on new apartments. Simhon said that policy discourages price reductions, even as Israel faces an oversupply of new housing and falling demand.
“It creates a chilling effect,” Simhon said. “Developers want to offer discounts to move inventory, but the banks are standing in the way.” Simhon estimated that removing such restrictions could lead to a 10% drop in home prices within several months. Home prices in Israel have risen roughly 35% in the past four years, despite high interest rates, declining sales, and the effects of war. The number of unsold new homes has surged past 80,000—double the typical figure, Simhon said.
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The committee focused on banks because two lenders control nearly 60% of the credit market for developers. While Israel’s Competition Authority found that most discount requests are approved, Simhon said the issue runs deeper. “Developers often don’t even submit the request because they know what the answer will be,” he said. “Banks push them to take on more credit rather than lower prices.” The Bank of Israel has expressed skepticism about the proposal, with some officials questioning whether the change would impact the broader market.
Simhon disagreed, saying the policy shift would break the status quo. “If developers are free to drop prices, others will follow. That’s how we create momentum,” he said. “This could return prices to 2021 levels.”