Ten years after Israel’s summer of social protests, the outcry over the prices of cottage cheese and other foods can be deemed a success, while the tent protest against high real estate prices is a failure, according to BDO Israel chief economist Chen Herzog.
The spontaneous protests of 2011 drew hundreds of thousands of protesters from all socioeconomic and religious backgrounds to the streets to object to the continuing rise in the cost of living. A sharp rise in the price of cottage cheese was one of the early sparks for the protests, and the dairy companies’ subsequent decision to cancel the increase spurred the momentum for further protests.
Since that time, the index of food prices in Israel has risen only 1.8%, one of the lowest rates in the OECD, Herzog’s report found. Food prices in OECD countries rose an average of 16% over the past decade.
Factoring in the average 30% salary increase during the same period, the cost of food has declined 28% over the past decade in relative terms, Herzog wrote, despite increased spending on food and a rise in restaurant visits and purchases of ready-made meals outside the home.
Prices for nearly all consumer products, including food, have been on the rise around the world this summer due to numerous supply-chain problems and shortages. While similar inflation seems all but inevitable in Israel, economists note a sense of fear of a backlash coming from food manufacturers and supermarket chains as they tiptoe around the issue, waiting for others to make the first move.
With so many households still trying to make up for the losses they incurred in the past year from work stoppages and lost jobs, some think the risks associated with raising prices may not be worth it.
“The social protest affected the competitive dynamics of the food market in Israel,” Herzog wrote. “In the last decade, we have seen a decline in concentration in the food industry, the entry of new producers led by private labels and consumer pressure that stopped price increases in food prices in Israel.”
Meanwhile, housing prices have gone the opposite direction, rising an average 52% in Israel over the last decade, with no end in sight. That rate is more than twice the 22% increase in home prices in Europe, the report noted. The rise is even more significant, considering that housing prices in Israel did not crash during the 2008 financial crisis as they did elsewhere.
Israel’s new government has made lowering housing costs and increasing affordable housing options some of its key goals for the coalition, even as the market suffers from a lack of supply. The Israel Lands Authority (ILA), the government body in charge of managing the use of land in Israel, has not made new lands available for building, and the problem has actually been getting worse, not better, during the past five years.
Construction and Housing Minister Ze’ev Elkin (New Hope) said he wants to add 300,000 units to the housing market. But with just over 50,000 currently being approved each year, it will require a strong effort.
“Without long-term planning and a significant increase in the volume of construction starts, we are now creating the seeds of another social protest for an entire generation that has not had the ability to buy an apartment,” the report concluded.