Foreigner's guide to property market: Who owns the land?

The state's ownership of 93% of the land is coming under increasing scrutiny as the population increases and real estate prices keep going up.

By LYLE PLOCHER
SHIKUN & BINUI REAL ESTATE (photo credit: SHIKUN & BINUI REAL ESTATE)
SHIKUN & BINUI REAL ESTATE
(photo credit: SHIKUN & BINUI REAL ESTATE)
As much as 93 percent of the land in Israel is either owned or managed by the state. This structure, which historically was meant to protect and keep Israel a “Jewish state”, is coming under increasing scrutiny as Israel’s population increases and real estate prices keep going up.
More about the 93%
State-owned land includes all land that was subject to the British Mandate prior to the foundation of the State of Israel and was requisitioned by the government subsequent to its establishment. The land that falls into this category represents about 69% of the land in Israel. Development Authority-owned land includes land that was confiscated in accordance with the Absentee Land Law and the Land Purchase Law, which primarily dealt with lands abandoned by Arab owners in 1948. This represents about 12% of the land in Israel.  And finally, the Jewish National Fund owns approximately 12% of the land.  Land that falls into these 3 categories is all managed by the Israel Land Administration (ILA) and the majority of this land is only made available to citizens of Israel or Jewish non-residents through long-term leases of 49 to 98 years.
The other 7%
Unlike the State owned land, much of which can only be leased to Israeli citizens or Jewish non-residents, privately owned land is far less restrictive. Owners of privately owned land in Israel are free to transfer ownership of their property to anyone, Jew or non-Jew, citizen of Israel or non-citizen of Israel. This type of land is in high demand and much of it can be found in the urban areas of Tel Aviv, Jerusalem and Haifa.
Current dilemma in Israel with Government owned lands
In order to keep up with Israel’s population growth and burgeoning real estate market, The Israel Land Administration has to release Tenders for land to Construction companies, who will build new apartments. During the recent real estate boom in Israel, the ILA has not been releasing new land fast enough and at prices that are reasonable enough for Contractors to make money. Consequently, new apartments are not being built at a sufficient enough rate to keep up with demand. Additionally, the planning process in Israel is the most cumbersome in the Western World.  Prime Minister Binyamin Netanyahu was quoted this past week as saying that “it takes five or more years to plan an apartment in Israel."
Land reform on the horizon
The news over the past two weeks or so has been dominated by protests in the streets about the high cost of housing in Israel. Protestors have set up tents throughout the country which seem to be getting the government’s attention. Netanyahu has promised immediate and sweeping action with reform to both the Israel Land Administration as well as the local Planning & Building Committees. The Prime Minister went so far as to refer to the ILA as a government monopoly.  
The reforms that Netanyahu is proposing also include provisions for “affordable rental housing” for students as well as the middle class in Israel.  All of these changes when implemented certainly will help the situation in Israel, but it will take a few years for the marketplace to start feeling the effects of the reform.  In the meantime, count on business as usual, which means hefty prices for real estate in Israel, whether you be a citizen or a foreigner.
Lyle Plocher is the Director of Buy Property In Israel and can be reached by email at lyle@buypropertyinisrael.com.