Fischer: Home prices could double in five years

More can be done in the real-estate market; the problems of housing supply and bureaucracy need to be dealt with.

By ADRIAN FILUT/GLOBES
June 20, 2011 22:35
2 minute read.
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More can be done in the real-estate market, Bank of Israel Governor Stanley Fischer said Monday, expressing doubts about Finance Ministry figures that indicate home prices are falling.

The problems of housing supply and bureaucracy need to be dealt with, he said at the Israel Democracy Institute’s Caesarea Economic Forum in Reshon Lezion.

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“Why are we worried? Because prices are rising by 16 percent, which means that prices will double within five years,” Fischer said. “This has to stop. The question is whether it will stop in a way that won’t harm the economy.”

“Our prices are already higher than in the US and Ireland,” he said. “History proves that many financial crises began in the housing market – properties – and then it suddenly all bursts.”

Commenting on Israel’s growth rate, Fischer said: “We have rapid growth. It should be remembered that we’re not China, and our per capita income is $30,000. We were very surprised by the 4.7% growth rate in 2010. Our 4% forecast for 2012 is conservative.

“What has happened to the unemployment rate is extraordinary. We thought the unemployment rate would reach 9% due to the recession, but it never even reached 8%. Since then, it has only fallen and has reached an all-time low of 6%. We’re close to full employment, which is a huge achievement. It isn’t because people stopped looking for work and dropped out of the labor market, since participation in the labor market has increased.”

However, Fischer expressed concern about the haredi and Israeli Arab communities.

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“Poverty in Israel is very complicated,” he said. “Outside the haredi and Israeli Arab communities, poverty has not grown. Part of the population has grown, does not work, and this cannot go on. If we don’t change conduct in the labor market for these two communities, there will be a very big and worrying problem.”

Fischer said he was worried about the global economy.

“Are we headed for a recession or only a slowdown? I don’t know,” he said. “What is clear is that US economic growth is slower than we thought, and the situation in Europe and Japan is serious. This is liable to affect us.”

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