A tent city is forming in Tel Aviv, as a combination of money printing and socialist planning methods have cut back on supply while demand in terms of sheckels escalates.
Rents have increased about 40 percent in the last three years, according to BusinessWeek.
BW explains part of the problem:
Israel’s real estate market has unique structural problems, too. As much as 93 percent of Israel’s land is owned or managed by the government, part of a policy dating to the nation’s founding in 1948 to preserve a Jewish state. That means most real estate sales are actually long-term leases, giving the state unusually large authority over land use.Meanwhile at Israel's central bank, money supply growth has been extremely volatile, under the supervision of the over-rated Stanley Fischer.
The bureaucracy-heavy process that builders must go through to get projects cleared has slowed construction permits, constricting the supply of apartments and lifting prices in a country roughly the size of New Jersey.
In 2009, money supply grew by 52.3%. It dropped to 4.6% in 2010 and bank deposits are soaring again in early 2011, up by 20% plus in recent months.
I live in Israel, and I've seen the housing prices shoot up also. I've been quietly insisting for years that we're in a bubble here. Earlier this year I found the Bank of Israel outstanding credit reports (at http://www.bankisrael.gov.il/deptdata/datastat/itrote.htm)and you could see how credit growth was almost flat from 2000 all the way until mid- to late 2008, then it started going up like crazy, particularly mortgage credit. People keep saying, yeah but the banks are sound, but you need huge down payments (true, 20% was always a bare minimum), blah, blah, blah. All I say is, it don't matter how scarce housing is, if there's no money to pay for it. True enough, the property market here is screwed, but Stanley Fischer is a seriously arrogant jerk who disclaims any responsibility for the bubble he caused (like mentor, like student?) and certainly doesn't seem to mind the endless adulatory praise for his acumen in navigating the country through a difficult patch.
ReplyDeleteI remember when he started lowering rates in 2008 and buying dollars, to keep the shekel from rising further. For a while, this strategy paid off, as the shekel fell along with everything else against the dollar. But only for a while.
It's not just housing that's more. Everything is going up.
Ben Bernanke was indeed Stanley Fischer's Ph.D understudy. I have never read more muddled, unintelligible, disconnected with reality writing in my life:
ReplyDeletehttp://dspace.mit.edu/bitstream/handle/1721.1/29839/05915220.pdf