There is a real estate property bubble in Israel. Tel Aviv apartments are being sold at a million dollars, when five years ago the price was 300,000 or so. The government announced in 2010 three reforms to regularize the market:
(1) Abolition of the Lands Authority. Most land in Israel is owned by the State, which sells it for development. The Land Authority is an autonomous corporation, unsensitive to government pressure. The idea was that land is property of the Jewish people, not commercializable. In view of the scarcity of lands to build apartments, Netaniyahu proposed to convert the Authority into a State owned company or something manageable. Nothing happened.
(2) Abolition of zonal planning committees. There are three hierarchical levels of planning committees, and any project requires the successive approval of the three organizations. The approval of a building plan demands about ten years, and requires several sometime opposite modifications to get the approval of differently composed committees. Netaniyahu proposed to abolish the mid level zonal committees, and transfer more responsability and power to the local level. Nothing happened.
(3) Abolition of taxes such as apartment sale tax (mas shevah) and so on. Matza, the head of the Tax Authority (and brother of Olmert's all-powerful secretary) was found guilty of corruption and tried. Nothing was done in the tax front.
Another factor is the scarcity of labor. Israel is being flooded by African infiltrators and no permits for foreign workers are granted. There is a two-tiered labor market: legal (about 2000 dollar per month) and underground (about 50 dollars per day).
Basically it became evident that Israeli bureaucracy resists change and governments are powerless to move them. Apartment prices are astronomical and out of the reach of young couples. Prices are expected to rise another 10% in 2011.
A different theory: It came to my mind that the last financial crash in the USA and Spain was caused by home prices going DOWN, that is, people realized that they were overpaying for their mortgages and stopped paying them, sometimes forfeiting their homes and cutting short their losses. Maybe Israeli government has no interest in prices going down, because it would cause major financial problems to the mortgage banks. Who knows.
9 comments:
It's true that there is a real estate bubble in Israel, but the things you listed are not really connected to it, and have more to do with normal supply and demand.
We don't have the mortgage issue that the Americans had because such a high down payment is required here, but prices are being driven out of control by foreign investors, mainly American and French Jews, in Tel Aviv and Jerusalem.
I dont understand the logic of foreign investment in Israeli real estate. It is relatively expensive and the rent is relatively low. Anyway, how many foreign investors there are?
The logic is fairly straightforward. For people who aren't savvy investors, the wisest thing is to diversify, and property is a relatively sound idea (at least until recently). Their first thought is naturally to buy a second home / vacation home / retirement home in a place they like to visit. American Jews who enjoy visiting Israel naturally think how nice it would be to own property here, all the more so if they're religious and/or Zionists and want to help the country. My own parents planned a couple years ago to buy an apartment here in Tel Aviv, since they visit here every year to see me anyway. I would have lived in it and paid the rent to cover their mortgage. For French Jews, property in Israel is even more attractive, since France will soon be too unsafe for them.
I give French Jewry not more than a decade.
They, along with Swedish Jews, etc, will have to bail out sooner or later and for those with foresight, the time to buy elsewhere is now...
The blame for this lies with the Useful Idiots who elected politicians like Obama, Tony Blair, Sarkozy and the Scandinavian pimps, none of whom give a rat's ass for Israel, Jews or indeed Western Civilization.
Anon.
It appears that Sweden is not such a paradise as used to be.
I give French Jewry not more than a decade.
They, along with Swedish Jews, etc, will have to bail out sooner or later and for those with foresight, the time to buy elsewhere is now…
Sweden today is what France will look like for Jews in a decade.
I think the reason French Jews like buying property in Israel is that many of them are basically quasi-Israeli (at least the North African ones).
Not so much French Jews as French-Israeli dual citizens.
True. I had forgotten that there's an Ashkenazi French Jewish community also.
There was a big Ashkenazi Jewish community in France before the war. From my father's shtetl, going to Paris was as popular as going to New York (probably more so in the post WWI period where immigration to the US was largely shut down). There was also an Ashkenazi community in Alsace that had been there continuously (the French kings has expelled the Jews at one time or another from France proper). But a very high percentage of the Ashkenazim (esp. the more recent immigrants) were killed in the Holocaust and after the war when things were not going so well for non-Muslims in Algeria and Morocco many of the those Jews left and came to France, so today's French Jewish community is more Sephardi. Still it remains the largest Jewish community remaining in the Diaspora outside of the US. If French Jews are well represented in Israel, that's because they now constitute a substantial % of the Diaspora.
Russia is amazingly down to 6th place in # of Jews just ahead of Argentina - if you count the former Russian dominions such as Poland, that's probably the lowest rank in 1000+ years - a truly historic change.
K
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