Monday 16 December 2013

Don't blame overseas property buyers for the failings of the Israeli government.

Don’t blame overseas property owners for the failings of the Israeli government.

Original Thinking from Barry Shaw.

The Knesset Finance Committee approved doubling property taxes on Israeli properties owned by foreign buyers.  It is a governmental step that punishes overseas Jews who have the gall of buying luxury vacation homes in Israel.

Actually, it is a political gimmick to detract attention for the appalling decades- old failure of their housing policies by focusing the spotlight on fellow Jews who decided to invest their money in Israel rather than taking their families on vacations to Florida, the South of France, and Spain. How foolish could they be!

Yair Lapid, Israel’s Finance Minister, praised the tax approval claiming it would help solve the domestic housing crisis. He is wrong and short-sighted.

Jews, with a passionate love of Israel, are being treated by our politicians as if they are the evil owners of “ghost apartments.”  The very image depicts sinister money-grabbers rather than appreciate that they have invested much of their hard-earned money into Israel rather than other warmer and more welcoming locations. They would certainly be able to buy similar properties in Europe and America at far lower prices and not be burdened with the already high taxes, including municipal taxes (arnona), which will increase further as a penalty to force them to sell their property and flee our shores. Pity!

How can Gideon Sa’ar possibly imagine that wealthy overseas owners, who bought their expensive vacation properties in prime Israeli locations, upgraded them to levels not achieved in the average Israeli home, and use them for their much needed R & R, would make their homes available for long term rent to “young residents who otherwise cannot afford presently cost-prohibitive rents” according to Daniel K. Eisenbud’s article (“Finance Committee approves doubling property taxes…” Jerusalem Post, 10/12/13).  The concept is ridiculous.

Champion of this misguided cause appears to be Ofer Berkowitz, Jerusalem’s Deputy Mayor, from the “Jerusalem Awakening” party. He should rename his party “Jerusalem Dreaming in Technicolor.”
He said, “Expensive housing impairs the ability of young people to stay in Jerusalem.”  
How does a three million shekels, or more, property owned by a London or New York family prevent a young couple with a budget, including mortgage, of one and a half million shekels from getting into the local property market? Does Berkowitz really think that this property would sell to the young people he is trying to help at the price they can afford, even if he succeeds in forcing the overseas Jews to sell?  It’s absurd!

Luxury houses in the best parts of Herzlia Pituach can and do cost in excess of ten million dollars. While it is true that the owners of such properties will not be phased by increased taxation, it is unreasonable to expect or demand that owners who use them as vacation homes will rent them out long term to young Israeli families. Even if such owners decide to sell, can any right-minded politician imagine this will, in any way, help those grasping to get into the housing market?  
So why would they punish such owners to no effect? Could it be a cynical ploy to tax people who do not vote, and cast these foreign owners as the cause of the problem?

May I remind Mr. Berkowitz, and other mayors of towns with a proportion of vacation homes, that they charge excessive arnona taxes in locations where overseas owners have their vacation properties. As such, the overseas owners contribute far more than the average population in their towns and cities while being less of a cost burden on the municipal social welfare, educational, and other resources and services. 

It is not the investment of overseas property buyers in vacation homes that is at the heart of the domestic housing market defect. It is the failed policies of Israeli governments, and punishing our overseas friends and relatives is not going to correct their failure.

Governments have not succeeded in cutting the Gordian knot of bureaucratic mismanagement. They have not held good on their promise to release large swathes of state land for development of affordable housing. Neither have they developed a plan for the construction of rental properties. They have failed to order the construction of apartments pegged to a price that is within the financial reach of the population. Another government remedy would be to reduce the growing cost of consumer goods and food prices. In 2004, Israeli food prices were 10% below the OECD average. If the government would regulate food prices it would allow young people to have that extra money to get into the housing market.

Our politicians should not play a false narrative by pointing envious fingers of blame at our overseas friends and make them feel guilty for the poor state of Israelis property crisis.  Instead, they should address the shortcomings and solve the problem with the tools at their disposal that does not punish and drive away our wealthy friends from abroad.

Barry Shaw is the author of ‘Israel Reclaiming the Narrative.’  
He is also the co-owner of Netanya Real Estate.

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