The relationship between hi-tech and real-estate - opinion

Journalists and other critics have blamed hi-tech’s high wages and exits for the increase in the price of real estate in Israel. So, what’s the truth, and where’s the problem?

Real Estate (photo credit: JPOST STAFF)
Real Estate
(photo credit: JPOST STAFF)

The hi-tech market is burgeoning, driving salaries upward. At the same time, journalists and other critics have blamed hi-tech’s high wages and exits for the increase in the price of real estate in Israel.

So, what’s the truth, and where’s the problem? Israeli technology companies are listed on the stock exchange today more than ever, and the truth is that this was to be expected. As early as 2013, when we established Aleph, our venture capital fund, we told international investors that Israel was transitioning from Start-Up Nation to Scale-Up Nation, and that companies worth billions of dollars would not be uncommon in Israel. The Israel of today has the technological infrastructure, the broad reserves of up-and-coming management, and, most importantly, iconic companies like Wix and CheckPoint that set an example and encourage the younger generation to aim high.
As markets boom, wages rise and living standards rise, as do real-estate prices. The problem is that although Israeli hi-tech is a completely free market, the housing market is dominated by state and local authorities, and they are failing at their jobs. It takes less time to start a start-up, develop it and take it public, than to issue a building permit in Israel. 
The rapidly growing hi-tech market is creating multinational companies in Israel that provide knowledge, investments and many quality jobs that engender national pride and contribute a great deal to Israeli taxes (25% of total national tax receipts). But a large gap has been created between the profits and huge success of hi-tech and the failure of the housing market and the regulatory bodies that impotently dominate it. Because of this, there is an insufficient housing supply, and every time someone buys an apartment as an investment it is an implicit long-term bet on ongoing incompetence of building and planning councils.
Furthermore, the Israeli hi-tech market is thirsty for working hands and creative minds. CEOs, developers, salespeople and marketing professionals alike contribute time and money to training more employees for the hi-tech market, filling these high-income and well-respected jobs. But here, too, there is a market failure, because the state does not invest enough in teaching hi-tech skills in elementary schools, high schools, and even universities. The result is that there is an insufficient supply of studies and students with lifelong skills in exact sciences, computer science or even basic programming. On the other hand, the demand for such workers continues to rise – and the price – that is, the salaries that employers are willing to pay – is skyrocketing, again, insufficient supply drives up prices.
SO, WHAT can we do?
First, we all have a civic duty to lend a hand and teach people to code or enable them to learn 21st-century skills. If every employee in the hi-tech market takes it upon himself to train four people, if we invest our money and our efforts to raise a young and skilled generation from all segments of the population, the market will grow even more and we will all benefit, both personally and nationally.
Second, the state should require programming classes in every elementary school. These should be part of the core curriculum, and there is no reason why they should not be taught both in religious and secular public schools, as well as in haredi society and in the Arab sector. This will help close gaps, facilitate a healthy economy and enable people to earn an honest and decent living.
Third, the state should give employers incentives to train workers within the workplace itself. Employers know best what the market needs and how to train workers accordingly. If the state rewards them for this, not only will there be many more skilled workers, but we will all benefit. We will grow the pie and stop fighting over the size of the slice. We also need to make it fast and seamless for companies to bring immigrants and others with engineering talent to Israel.
As for the housing market, as I have already written, the government should immediately grant incentives that push the authorities to issue building permits within four months. If that’s not possible, they should nationalize building permits or let citizens self-issue them, providing they take legal responsibility for mistakes and mishaps. Cities should build high-rise buildings near transportation arteries and train stations, and rezone so the requirement for building parking spaces will no longer be a necessity. All of this should be done with the aim of drastically lowering housing prices.
In this context, I invite you to read online ( about Machshava Tova, which works with all segments of the population to train the future generation of Israeli hi-tech. And that, truly and without exaggeration, is for the glory of the State of Israel and a source of national pride!
The writer is a businessman, author and venture capitalist in the Israeli and American High-tech industry and a managing partner at Aleph, a Tel Aviv venture capital fund.  His latest book "The Tree of Life and Prosperity" is due out on August 24th. He is also a founder of the "starupistim" program of the Machshava Tova Association.