Israel has hit the top of the global list for rising housing costs. On November 1, 2013 a Goldman Sachs study revealed that the rise in housing prices in Israel as well as prices of current existing units makes Israel now the highest amongst OECD (Organization for Economic Co-operation and Development) nations above the other leaders Norway and Switzerland. Prices in Israel have soared 40% since 2009 and risen 72% since 2007.
The stark difference between Israel and its European counterparts in this study is that the average annual salary per couple of income to housing ratio is disparate, enabling the Norwegians and Swiss who also enjoy strong economies to achieve the dream of owning and maintaining one’s own apartment in the city of their choice.
The Israeli government took steps that took effect in 2011 hoping to suppress what it too late perceived as a “housing bubble.” It restricted down payments to 40% and tried to release those holding on to investment apartments by lowering taxes on their sales in the hopes of simultaneously suppressing buyers and increasing supply in the market place. These deterrents did bring prices down marginally but also placed a new burden on young couples, immigrants and others who wait for the opportunity to buy homes while struggling to come up with 40% down payments as housing prices change little in their favor.
The high cost of land and taxation on companies building and selling new units forces the vicious cycle to continue by offering new housing at the same high prices as the current existing. The Israeli government needs to take serious action to release lands and relieve building costs by easing restrictions on such programs as “Tama 38” as well as develop housing projects in metropolitan areas that are attractive to buyers in size and quality.
Affordable and available housing is a key to population growth and survival. Affordable housing in metropolitan areas where the employment opportunities are greatest is a cornerstone of economic health and growth. The high cost of housing presents a danger of a brain drain and attraction to families of all ages who seek a better life to such countries as Germany, Canada and the United States. The bubble in the US was created for entirely different reasons but the result is a long-term market correction beginning to be felt in slightly increased prices and more buyers able to reenter the housing market.