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Israel immigration seen fueling real estate boom amid shortage

Monday, March 16, 2015 - 07:19
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Israel is anticipating a surge in immigration from Europe this year after terrorist attacks in France and Denmark, a development that would complicate government efforts to slow the growth of property prices.

[TEL AVIV] Israel is anticipating a surge in immigration from Europe this year after terrorist attacks in France and Denmark, a development that would complicate government efforts to slow the growth of property prices.

Prime Minister Benjamin Netanyahu urged European Jews to move to Israel following the Jan 9 shootings at a kosher supermarket in Paris and an attack in a Copenhagen synagogue last month.

Eldar Real Estate Marketing, a company that represents 70 residential projects across Israel, this year increased its overseas roadshows to as many as four a month to tap an increase in demand, led by France and Belgium.

"We expect to see more interest coming from communities in other European countries if the anti-Semitic situation worsens," said Dan Gingis, head of Eldar's foreign residents division.

Israeli housing policy became a key issue in the campaign for this week's national election after a Feb 25 report said Netanyahu's government failed to act quickly enough to tackle a surge in real estate prices. Home prices, fueled by short supply and low borrowing costs, have increased by about 90 percent between 2007 and 2014, according to the Central Bureau of Statistics.

"Resolving the housing crisis" trumps all other challenges, said former communications minister and Kulanu party chairman Moshe Kahlon at a business conference in Tel Aviv on March 10.

As attacks on Jewish communities abroad grew towards the end of the year, so did nonresident purchases of homes in Israel.

More than a third of all the homes bought last year by nonresidents were purchased in the fourth quarter, the most deals by the group since the second quarter of 2013.

SECURITY CONCERNS

The number of western Europeans who moved to Israel almost doubled last year to 8,919, according to data compiled by the Jewish Agency, which handles immigration. That was the third straight annual increase driven by French Jews, largely motivated by a sense of insecurity, said Avi Mayer, a Jewish Agency spokesman.

Few canceled plans to move to Israel during the 50-day military conflict in July and August with the Islamic Hamas, which is considered a terrorist group by Israel, the European Union and the US.

"The number of immigrants last summer was even higher than the previous year," Mr Mayer said, adding that some Jewish leaders in France have instructed community members to avoid wearing skullcaps on the street.

Israel offers citizenship to all Jews, their children, grandchildren and spouses.

About 80 per cent of the western Europeans who moved to Israel in 2014 were from France, which has the continent's largest Jewish population. Israeli immigration officials expect French arrivals in 2014 to more than double for the second straight year, to about 15,000.

Low Unemployment

Growing antisemitism has become a stronger motivator for immigration than Israel's relatively low unemployment rate and growing economy, which in the past lured young French adults seeking an alternative to the shrinking job market at home, said Mayer.

"Economics are still a factor but much further down on the priority list than before, replaced by a sense of insecurity," he said.

Israel's unemployment rate declined to 5.6 percent in January, the lowest since at least 2012, according to data compiled by Bloomberg. That compares with 10.2 percent for France.

The Israeli economy expanded 2.8 per cent in 2014, the slowest pace since 2009. Even so, it still beat every major European economy and, according to a December forecast by the Bank of Israel, growth will accelerate to 3.2 percent this year.

"The surge in demand for housing is already outstripping the supply, so the addition of at least 10,000 French arrivals will only add to pressure on prices," Adar Etzioni, an analyst at Excellence Nessuah Broker Services Ltd, said by phone.

New apartment sales in Israel soared 52 per cent in the fourth quarter from a year earlier, the biggest advance since 2002, the Finance Ministry said on Feb. 18.

War Chest Africa Israel Residences Ltd, the country's biggest housing developer by market value, said Feb 23 that it has more than 300 million shekels (S$103 million) available for real estate development and sees new immigrants as a potential market.

"People are selling their homes in France and elsewhere and are emigrating as antisemitism plays an important role," Chief Executive Officer Oren Hod said in an interview.

Residential property prices are expected to rise by as much as 7 per cent this year, boosted by interest rates close to zero and a shortage of 130,000 homes, according to the Association of Contractors and Builders in Israel.

Kahlon has promised to cut housing prices by removing obstacles to the construction of 250,000 homes, should he win enough votes to become a policy maker.

The Bank of Israel has voiced concerns about housing prices. Deputy Governor Nadine Trajtenberg has said the solution to the problem is to boost supply.

An increase in immigration will make the situation worse, Mr Etzioni said. "Even if we don't see a wave of arrivals seeking new homes, prices will continue to rise because of a shortage in supply," he said.

BLOOMBERG