Housing prices

Seth J. Frantzman is clearly asking the wrong question in his correctly titled “Israel’s politicians must get real about housing” (Terra Incognita, March 9). In any market, price movements are driven largely by supply and demand. If demand is higher than supply, prices go up. If supply is higher than demand, prices go down. This is Economics 101. So if people can’t afford housing but prices are still going up, there must be other forces at play, which Frantzman doesn’t clarify. Fortunately, you supply the answer on the next page, in the article “Home purchases by foreign residents surge” (Business & Finance). Demand in Israel is being distorted by foreign investment in the housing sector. This distortion is aggravated by the fact that, by comparison with the source of the demand, which is largely the United States and Europe, Israeli housing is still very cheap. Investors from Europe, for example, can easily take the option of selling for high prices there (or taking second mortgages at the currently very low interest rates) and then buying here. We are not necessarily talking about the very rich; today, a middle-class immigrant from France or the UK can probably sell his house, buy a large apartment here and bank a few million shekels. I think Frantzman needs ask another question: What can the politicians do to level the playing field between Israelis and foreigners? It seems to me that in the rush to encourage immigration and investment, we have lost sight of the plot by offering too many incentives to the point where our own society is crumbling.

HENRY KAYE

Ashkelon

One of the main reasons for the high cost of housing here is the simple fact that people want to buy homes in successful countries. Israel is clearly successful if one considers the high price of homes. By having a successful country in virtually all the main categories of importance, we not only have high local demand, but also demand from abroad. No doubt, if Israel should start to fail, the only dubious advantage we would accrue are lower prices for homes. In the meantime, a very large number of people have become millionaires simply by owning homes. Of course, there are other causes for high prices, such as the length of time to get permits to build and the limited amount of land being freed for use by the state. But as long as we have a successful country, the prices cannot be expected to drop very much.

DUNN RABINOWITZ

Rehovot