Tuesday, June 7, 2011

Rediscovering Israel in 2011

Realty Times has a fascinating article by Clifford A. Hockley, President of Bluestone & Hockley Real Estate Services, who writes about rediscovering Israel. It’s worth reporting in full, so here it is.

I have just returned from a three week trip to Israel. I had many wonderful experiences, too many to chronicle, but I will try to summarize some of my key impressions here:

Residential Real Estate

What struck me the most about this visit (my fourth), was the amount of construction activity occurring.

In one city close to Tel Aviv we counted eighteen (18) cranes building apartments (read condominiums). In Israel, the vast majority of construction is completed in rebar reinforced concrete (much like Mexico). In the large cities, due to land shortages, multistory buildings are being built to house the growing number of inhabitants.

In some cases throughout Israel, four story buildings are being jacked up and bomb shelters and parking is being added on the bottom and two or three more stories are being added on top. There is no lack of construction or architectural creativity.

In speaking with a residential real estate agent in Kfar Saba, a suburb of Tel Aviv, I discovered that the demand for housing keeps pushing up the apartment (condominium) prices.

This is confirmed in a January 19, 2011 article in the Global Property Guide: “Strong price increases were seen throughout the country. In Tel Aviv, the economic centre, the average house price rose 17.75% y-o-y to ILS 1.778 million (US $499,245). In Jerusalem, the 17.5% price increase pushed average prices to ILS1.42 million (US $398,216). Annual price increases in other administrative regions ranged from 15% in the South, to 20% in Haifa.

The current upswing in house prices has pushed the national average price, at ILS1.05 million (US $294,660) up by 37% during the period from Q4 2008 to Q3 2010. Over the same period, the average price in Tel Aviv has risen by an astonishing 46%, and in Jerusalem by 30%.

A housing bubble much like the American bubble seems possible. Banks have been tightening up their lending requirements. Israeli Banks look for a 20 – 40% down payment. Very few people actually own a free standing home in the major cities. Typically housing is townhouse style or condominiums in large multistory buildings. About 67 – 68% (according to 2008 survey) of the Israeli population lives in an apartment or home they own. One can estimate, the balance live either at with parents, in rentals or senior living facilities.

Due to the strength of the rental market and a law that allows Israeli’s to receive tax free income on their first rental, 33% of the current buying market is made up of real estate investors.


Why would I address parking? There is a huge shortage of parking especially in Tel Aviv and Jerusalem. Even though the purchase of a vehicle is taxed at 100% and fuel costs exceed $ 8 per gallon, there are a lot of autos in Israel. They are small fuel efficient vehicles, but they need to be parked. In one area of Tel Aviv (Bloch Street, close to Rabin Square), there are over 30,000 registered cars with only 25,000 parking spaces.

The cities have very aggressive parking enforcement, with frequent enforcers, walking or moped inspecting the cities. Permits are purchased throughout the country for long term or short term parking. Short term double parking is common as people load and unload. Many roads are narrow and vehicles squeeze through the traffic, honking horns and weaving in and out. The night we left Israel, we tried to move our car from a paid parking lot to street parking to be closer to the apartment we were renting. We spotted four spaces; I rushed to get my car, by the time I returned (six minutes later) all of the spaces, but one, were taken. As we left that evening, multiple drivers were circling the streets, looking for evening parking. Overnight parking in a parking lot can cost $20 a night.

Most people commute by train, bus, taxi, motorcycle, moped, bicycle or on foot.

Commercial Retail Real estate is expensive, especially in the big cities. In the densely packed areas, you might find many small neighborhood stores, ranging anywhere from 50 to 400 sq ft large.

These stores are typically in mixed use buildings with apartments on top and commercial spaces on the ground floor. It is not unusual to find a shoe maker in a 25 sq ft space, or a hardware store in a 300 sq ft space, filled to the ceiling with all sorts of random goods from toilet seats to light bulbs. In the suburbs, you can find shopping centers and malls filled with small and larger stores, but land as space is still a premium, and so is parking. Parking spaces in shopping malls are usually about 8’ by 8’. It is not unusual to have cars marred up while opening the doors in such tight spots.

Clearly, Israel still has significant security concerns. 120 missiles and mortars were shot into southern Israel from Gaza while we were there. Just the week before we arrived, a bomb went off at the Central Jerusalem bus station. On the other hand, weapons are less visible than they were during our last visit in 2007. All large stores, restaurants and office buildings have security guards, most of them are armed. Bags, backpacks and purses are searched. Shopping centers are fenced and you have to drive through a security check before you can park your vehicle. Smaller villages in the north are fenced and gated. The army is still visible throughout the countryside. However, compared to our last visit, we felt much safer this time.

The challenge of national security unifies the nation. After high school, all Israeli men and women get drafted to military service, men for three years and women for two years. After military service all men serve an annual reserve commitment (of one to four weeks) until they are forty. Most women are exempt from this reserve commitment. Orthodox Haredi Jews and Israeli Arabs typically do not serve in the military. Druse, Checker and Beduin do serve in the Israeli military. This military service is the great homogenizer of the Israeli state and helps solidify the commitment to the country. Taxes are high, but in exchange there are many social services including world class medical services. Israel has some of the same problems the US has including a looming physician shortage and lack of medical care in rural areas. Israel is a small country. I was able to drive from Tel Aviv to Jerusalem in 45 minutes and from Tel Aviv to Tiberias in the north on highway Six in an hour and 45 minutes. So, for critical medical care, many Israelis drive to Haifa, Tel Aviv, or Jerusalem or Beersheva.

I was fortunate to be able to cover a lot of ground on our three week trip. The economy is booming, or so it seems. But it is a very expensive country to live in. One sector after another, strikes for more wages. Innovation is king. Israeli’s are creative, constantly looking for answers outside of the box, to solve their issues. Will there ever be peace? Who knows? The issue polarizes all Israeli’s Arab, Jewish and Christian alike. After Gaza hand back and the continued security threat from Gaza, the political minds will have a hard time giving up the West Bank to the Palestinian Authority without some iron clad guarantee for safety, security and the recognition of Israel as a state.

As a visitor, I had a great time. This is truly the land of the Bible… and the coffee shop. Like America, it is the land of the melting pot. You will find Russian, French, English, Amharic, Arabic and Hebrew speakers there. If you can, I encourage you to visit; you will never forget your stay.

The article can be found here, Rediscovering Israel 2011

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