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Dive into the Israeli housing market crisis, exacerbated by war fallout. Explore market collapse, labor shortages, and economic challenges.
Introduction
In the aftermath of conflict and geopolitical tensions, the Israeli housing market faces an unprecedented crisis. Explore the intricate challenges, from labor shortages to economic downturn, as we delve into the Israeli housing market crisis and its far-reaching implications.
Unprecedented Challenges in the Israeli Housing Market
Factors such as the severe shortage of labor and the high cost of construction materials, resulting from the “Operation Al-Aqsa Storm” and the ongoing war by the Zionist regime against the Gaza Strip, now in its second month, have pushed the “Israeli” housing market to the brink of collapse.
Urgent Measures Amidst Real Estate Crisis
Israel’s finance ministry is preparing for an urgent meeting to address the critical state of Tel Aviv’s real estate market, particularly following the conflict with the Palestinians in Gaza, which has led to a decline in construction activity and a significant shortage of construction labor. This shortage is a result of the absence of Palestinian labor, the departure of foreign workers from the occupied territories, and the surge in construction material costs and transportation expenses.
Construction Industry Faces Bankruptcy Threat
According to a report by the Hebrew newspaper Ynet, numerous construction companies in Israel are teetering on the edge of bankruptcy due to financial difficulties arising from the rise in interest rates and the reduced demand for housing in the occupied territories.
Industrial Sector in Perilous Condition
The state of Israel’s industry is at a critical juncture, as indicated by the cautionary statements from the builders’ union and high-ranking officials in the “Israeli” infrastructure industry. Their emphasis on the impending collapse of the industrial sector has prompted the Ministry of Finance of Israel to convene an urgent meeting with the leaders of Israeli industries. The purpose of this meeting is to assess the condition of the industrial sector, which, according to the proprietors of major industries in this regime, is encountering its most severe crisis since the establishment of Israel.
Call for Immediate Action to Avert Disaster
This publication cited a senior official from the Ministry of Finance who stated, “The situation is perilous and exceedingly critical, and it concerns everyone.” He believes that the sole remedy is to support various sectors, address the labor crisis, and reduce the prices of raw materials, including construction materials.
Financial Losses and Warning Signs from Industry Leaders
“Raul Srugo,” the president of the “Israel” Union of Builders and Housing, also stresses that numerous well-established construction and contracting companies, some of which are state-owned, have suffered significant financial losses due to the war.
Pre-existing Crisis Exacerbated by War
Srugo points out that the housing sector was already in a crisis prior to the commencement of the war, attributed to ongoing internal protests and the economic policies of Netanyahu’s cabinet. The war has exacerbated their situation tenfold, making it even more distressing.
Impending Disaster Unless Swift Government Action
Srugo warns that unless Netanyahu’s cabinet takes action to ameliorate the sector’s conditions, we will witness a genuine disaster. Banks are eager to recover their loans, companies have incurred losses due to the suspension of all land and housing sales in “Israel,” and they are unable to repay their debts. In essence, it can be stated that the housing and construction sector, as well as the industry in general, are governed by arduous and intricate conditions, leading to the Israeli industry teetering on the brink of complete collapse.
Labor Shortage Crisis in the Israeli Housing Market
Srugo persistently stresses the urgent need to promptly recruit foreign labor for employment in the industry. He emphasizes that this crisis is far more perilous than commonly perceived.
Impact on Construction Projects Post-War
He notes that while some construction projects have resumed their operations in a bid to avoid bankruptcy, they are operating at only 30% capacity due to the departure of 80,000 Palestinian workers from the labor market following the war.
Global Labor Shortage and Broken Agreements
This issue not only pertains to Palestinian labor but also involves a critical shortage of foreign labor, including workers from China and Moldova, who have left Israel since the onset of the war.
China has prohibited its workforce from traveling to Israel owing to geopolitical tensions and crises, and acquiring construction workers from Moldova has become exceedingly challenging. Prior to the war, the Israeli cabinet had agreed to increase the foreign workforce from 30,000 to 50,000 and had also approved the import of an additional 10,000 surplus foreign workers. However, the war prevented the implementation of all these agreements.
Israeli Housing Market Demand Decline
As per the findings from the research conducted by the Center for Drawing Geographical Maps of Israel, in November of the preceding year, there was a significant decline in the demand for housing, particularly in the major cities of Israel.
Shift in Renter Priorities
Official statistics indicate an 83% decrease in the demand for housing in Ashkelon, a 45% decrease in Ashdod, and a 50% decrease in Tel Aviv. Concurrently, 30% of Israeli renters are contemplating a change in their housing situation. Their focus is not on expanding the living space, the number of rooms, or the available amenities, but rather on the structural integrity and safety of the building.
As a result, the construction standards in Israel have undergone a transformation. Instead of prioritizing the well-being and contemporary global standards, builders are now focused on enhancing the structural integrity to appeal to potential buyers.
Moreover, numerous construction projects in the border regions of the southern and northern occupied territories have been halted.
Bleak Outlook for Israel’s Housing Sector
Conversely, Dror Shlomi, the CEO and proprietor of “Dror Group Real Estate Investments,” paints an extremely challenging and terrifying picture for Israel’s housing market. He predicts a staggering 90% decline in the housing sector.
Market Challenges Amidst Various Strategies
Furthermore, the volume of housing transactions in “Israel” in November of the current year witnessed a 50% decrease compared to the previous year, despite sellers resorting to various tactics to stimulate market demand, such as offering discounts, reducing prices, and providing loans. However, the persistent war and the escalation of interest rates represent the most significant challenges that have propelled the “Israeli” housing market into a state of complete recession.
Industries teetering on the brink of closure
In a contrasting development, the Hebrew-language newspaper “Israel Hayom” underscored in a detailed report that factories situated in the northern and southern regions of “Israel” are perilously close to complete shutdown since the commencement of the conflict with Gaza. These factories are grappling with either a severe deficit in labor or a drastic decline in the demand for and purchase of their products.
Unfulfilled Compensation Promises
Israel Hayom further elaborates, stating that despite the prior announcement by Netanyahu’s cabinet regarding the allocation of 100 percent compensation for damages incurred by factories located within a 7-kilometer radius from the borders, such as Ashkelon, no tangible measures have been implemented in this regard. This situation poses a grave threat to the future of these factories and significantly jeopardizes the prospects of the Israeli industry.
Fear-Driven Impact on Factory Owners
In addition to the labor shortage predicament, which has evolved into a highly hazardous epidemic for Israeli industries, numerous factory owners continue to grapple with the aftermath of the Operation Al-Aqsa storm, and their reluctance to return to their factories due to fear represents a fatal blow to the Israeli economy.
Amnon Merhav, the director general of the Ministry of Economy and Industry of Israel, voices strong criticism against the officials of this ministry, asserting that “this war has led to the violation of all economic principles.”
Unlawful Budget Actions and Economic Impact
He specifically calls out the budget department of the Ministry of Finance, highlighting, “Since the onset of the war, the budget department has engaged in numerous unlawful actions. Instead of fostering investment in industry and projects, accelerating and enhancing economic growth, and supporting business activities to create job opportunities, this department has opted to reduce the budget of various plans, projects, or ministries to finance war and military expenses. This approach is poised to have a detrimental impact on Israel’s industry and economy.”
It is worth noting that not only the Ministry of Economy and Industry of “Israel” has experienced budget reductions, but the condition of numerous ministries in this regime is similarly affected.
The most recent projections indicate that the conflict in Gaza will result in an expenditure of 200 billion shekels for Israel, according to the most optimistic estimates. This amount represents a third of Israel’s budget in 2023 and surpasses the GDP of Jordan, Lebanon, and Latvia.
Escalation of Foreign Debt
Furthermore, this conflict is anticipated to raise Israel’s foreign debt by ten percent. Consequently, it is foreseen that the foreign debts of this regime will soar to 170 billion shekels.
Conclusion: A Crossroads for the Israeli Housing Market Crisis
In the wake of the multifaceted challenges, the Israeli housing market crisis stands at a critical crossroads. The severe shortage of labor, coupled with skyrocketing construction material costs and geopolitical tensions, has pushed the industry to the brink of collapse.
In the aftermath of Operation Al-Aqsa, the Israeli housing market finds itself at a crucial juncture, grappling with unprecedented challenges. The severe labor shortage and soaring construction costs, exacerbated by the ongoing war with Gaza, have pushed the industry perilously close to collapse. Despite the economic hardships faced by Israeli civilians, proponents of the operation argue that it was a necessary measure for national security.
The urgent meeting convened by Israel’s finance ministry underscores the gravity of the situation, with industry leaders warning of an impending industrial recession. President Raul Srugo’s poignant observations shed light on the pre-existing crisis that has been amplified by the war.
The dwindling demand for housing and declining industry standards reflect the direct impact on the daily lives of citizens. The Israeli government’s allocation of funds to military expenses, as criticized by industry leaders, raises questions about the prioritization of economic stability.
In this complex scenario, one must weigh the strategic objectives against the economic and humanitarian costs.
