"Investment in national infrastructures must not be cut, it's the engine of Israel's growth"

"Investment in national infrastructure must not be cut. It is the engine of Israel's growth," said CPA Dan Attias, board member and head of BDO's audit arm, at Calcalist's real estate economics conference, held in collaboration with Mizrahi-Tefahot and BDO.

"We are currently experiencing one of the most complex periods in Israeli economy history," Attias said. "It is difficult to witness the North burning and the rise in anti-Semitism around the world. There is uncertainty affecting us all. In the face of this, it is heartening to see the public and the business community mobilize. This is one of the bright spots of the era. We must all work toward unity and peace among us. At the same time, we must drive the economy forward so that it can bear the burden of the war. In the real estate market, we need to focus on increasing population density, shifting the terminology from 'urban renewal' to 'population density.' This should be a major goal. Everyone is talking about housing prices. While the steps being taken are positive, they are not enough. Significant change is needed. Adding two or three floors to existing buildings won’t suffice. We need better infrastructure and taller buildings."

Attias reviewed the macroeconomic factors affecting housing prices in Israel: "Global interest rates were raised to curb inflation, which has slowed and dropped to an average rate of 2% to 3%. However, high interest rates suppress investment. Current forecasts predict that interest rates will decrease by 0.2% in the coming year. Earlier in 2024, there was talk of rates returning to zero, but this will no longer happen. Additionally, Israel's debt is increasing, and after a slowdown in 2023, housing prices rose by 4.7% by the end of the year—an annual rate of over 10%. At the same time, the inventory of unsold apartments has remained stable since October. Why aren't prices falling? According to data from the Association of Contractors Building the Land, the number of workers in the construction industry has decreased since the war began, particularly among Palestinian workers. Since October, the workforce has grown, mainly due to Israeli and foreign workers, but there is still a shortage of 50,000 workers. The existing workforce is also more expensive, which raises construction costs. Additionally, since mid-2022, there has been a 20% decrease in construction starts."

Attias further noted that by 2030, Israel will be the most densely populated country in the West, yet Tel Aviv and Jerusalem are much less dense than other global metropolises. "Demographics are driving population growth, and with limited space, increased density is inevitable. To achieve this, investment in national infrastructure must be expanded. A decade from now, Israel will still lack sufficient rail and road infrastructure."