Israel was the number one region in the world in terms of housing price increases in 2017. The trend began in 2016 according to data curated by the Finance Ministry. Over the past decade, housing prices have gone up 118 percent. However, these prices did not follow a corresponding rise in demand. The result has been the rise of the “ghost apartment,” or apartments with no tenant for the majority of the year. You might think that ghost apartments in places like Tel Aviv would cause a drop in value in the surrounding real estate. In many cases, the result is actually the exact opposite.
The Real Estate Babylon for Local Residents?
The November 2017 session of the Knesset State Control Committee was completely devoted to the ghost apartment issue. During the meeting, the Israeli deputy director of statistics brought forward data that showed the problem was approximately four times as large as previously thought. Merav Pasternak reported that the number of ghost apartments was 159,700, not 40,000.
That 159,700 number puts the Israeli diasporah on par with Vancouver, New York, London, Miami and Melbourne as one of the leading cities with ghost apartments. The number is especially significant because it includes units, basically abandoned by international investors. The result is a housing market that is out of reach for many local citizens. The demand and supply curves are pushed out of proportion. Therefore this is causing a rise in housing prices that the market cannot sustain.
In these major cities, ghost apartments are actually not a symptom of a bad market. But what is the cause of the abandonment?
The UN Reports on Israel
The 2017 United Nations report on the Right to Adequate Housing showcased a disturbing trend in international cities and regions like Israel. Rich international investors are beginning to use housing units as stores of wealth rather than actual housing. Some investors may utilize the apartment as a vacation home, but for most of the year, it remains vacant.
These units experience no drop in value because of their vacancy. Because many of these units in Jerusalem, across the Gaza Strip, in the West Bank and in other parts of the Middle East are paid for in cash, there is no pressure put on the market to readjust to a more affordable rate. Prices are actually bid up over time, reducing the ability of local homeowners to move into ownership. These people are relegated to housing units that are farther from centers of commerce. Further reducing their ability to maintain gainful employment.
Money Laundering through Real Estate
Ethiopian news coincides with a report from Avichai Snir, economics professor at Bar Ilan University. Over 50 percent of the money that is laundered across the world is laundered in real estate. Although the results are just showing themselves in the modern real estate market, the trend is one that dates back at least a decade or so. The bottom line – today’s Israel is definitely not the religious Israel of aliyah, the old city, ancient Hebrew and Jesus Christ. Today, Netanyahu and the rest of the government continue to overlook the ghost apartment phenomenon to the detriment of the population.
Why Prices in Modiin Israel Continue to Rise
Most experts agree that the Israeli record low interest rates have joined forces with an extremely slow bureaucracy in real estate to create a demand for housing that surpasses the supply. However, there are some critics that see international interests playing their hand.
The fact that ghost apartments are rising across the world showcases the power of the new global elite. These are people who do not have to live where they make purchases. They can pay more for local real estate than the local population. They bring currencies with advantageous exchange rates into the market.
Experts from different agencies, philosophies and metrics have all agreed on this point. When you get the same answer from various perspectives and viewpoints, it is time to give some credence to that viewpoint. There is foreign investment driving up Israeli prices, but not just here. This is a phenomenon that is taking over the major cities across the world.