Fleeing Ra’anana

This, from Globes, is interesting:

Israelis leaving big cities

Israelis are bucking a global trend by moving into smaller communities.

Migration figures are an important measure for any community. A city losing its population is a signal that something in the municipal cost-benefit equation is not working.

Cities and communities that are adding new families, on the other hand, are showing that they can be attractive to many Israelis, even if those new families are going there to live because they cannot afford the cost of living anywhere else.

According to figures recently published by the Central Bureau of Statistics and the Ministry of Construction and Housing, Israelis are fleeing the large cities, in absolute contrast to the global urbanization trend strengthening the world’s largest cities. Israel’s five largest cities, Jerusalem, Tel Aviv, Haifa, Rishon Lezion, and Ashdod, where a quarter of Israel’s population (two million people) lives, had negative migration in 2010-2013. Other than Haifa, each of these cities also had negative net migration in 2009.

Of Israel’s 40 largest cities (with 40,000 or more residents), only 17 had positive net migration in 2013. In 16 cities, containing 40% of Israel’s population, net migration was negative in each of the years from 2009 through 2013.

It seems that despite the distinctly urban lifestyle of most Israelis, and even though the big cities offer a broad range of housing solutions, educational institutions, culture, employment centers, etc., something there is just not working. The high price of housing in those cities, the absence of adequate construction solutions, and perhaps economic and social temptations in other cities are drawing people away.

Now, here’s where it comes closer to home:

Fleeing Ra’anana

For some reason, size has become a disadvantage in the Israeli way of life. Other than Petah Tikva, all the cities with 100,000 or more residents are losing people. Even Tel Aviv, which has so many attractions to offer, saw 22,500 people leave in 2013, while only 20,500 moved to the city (legal residents, of course; thousands of immigrants come to the city who are not legally registered in it). 18,000 Israelis left Jerusalem in 2013, while only 10,500 moved there.

Ra’anana has the largest negative migration in Israel, losing almost 2% of its population yearly: 15-18 out of every thousand residents. The fact that the city is currently almost aggressively promoting construction in the framework of National Outline Plan 38, and is building large neighborhoods in the eastern part of the city (Neve Zemer, to contain 3,500 apartments) indicates an attempt to reverse the trend, and perhaps to combat the high prices in the city (according to Ministry of Construction and Housing figures, a new four-room apartment in Ra’anana costs an average of NIS 2.14 million) that drive away many of its residents and making it difficult for other Israelis to settle there.

In stark contrast, Kfar Saba, which is right next to Ra’anana, is the leader in positive migration. Massive construction in the city and the relatively cheap alternative it provides to the other Sharon area cities (a new four-room apartment there costs an average of NIS 1.83 million) are making Kfar Saba the preferred option for many families. Just behind it, Hod Hasharon (NIS 1.82 million on the average for a new four-room apartment) has also been waiting patiently far from the limelight (certainly in comparison with its prestigious neighbor, Ramat Hasharon), and has also consistently shown positive net migration in recent years.

While Kfar Saba is the popular alternative in the Sharon area, in the northern outlying areas this role is played by Afula.

Points to ponder:

  • There’s anecdotal evidence of more French immigrants settling in Ra’anana. Will that reverse the trend when the next set of statistics come out, or are they just taking up some of the slack?
  • It’s difficult to know what drives the huge difference in property prices between Ra’anana and Kfar Saba. They are, literally, across the road from one another. There are a much higher percentage of Anglo immigrants in Ra’anana. Is that the driver? ¬†Why?
  • The mayor of Ra’anana has recently introduced a new tax needed to fund infrastructure repairs. The drop in population may have contributed to the need for this new source of money.
  • It’s also difficult to see how the huge construction ongoing in Ra’anana is going to reduce prices. The recently completed development next to ours is more than half empty, but there is no sign of a drop in prices. Either the builders are well capitalized, or the bank have taken over, and will just wait, and wait.
  • I can see why Petah Tikva is attractive; the housing is more modern, and there’s a real communal buzz about the place. However, like most Israeli cities, the road infrastructure struggles to cope with the volume of traffic.

Housing and taxes woes

There is a difficult housing situation in Israel. In a nutshell, property prices are too high, and continue to rise. Young people are – generally – unable to afford to buy. It’s a problem that is not going to be solved overnight, but it would be helpful if people recognized one of the universal laws of economics before offering solutions: supply and demand. In short, there is a high demand for the main areas, like Tel Aviv, and there is a limited supply. So long as that situation continues, high prices are inevitable. (Rents are also high, not to say astronomical.)

The government have tried to take the heat out of the property market, not so much to bring prices down, but to try and avoid a property crash.

One method they have used has been increasing the restrictions on mortgages.

Another method they have used has been increasing the purchase tax where somebody buys a second property. This latter method seems to be easily avoided judging by anecdotal evidence. There’s an article at Globes (here) which sheds some slight on the situation, and is worth reading for background purposes.

Regardless of whether this type of tax is a good idea, it does seem that the state could make a better effort in collection, and to make avoidance much more difficult. Or, if not that, to come up with a flat rate tax that everyone had to pay.

And there still needs to be a concerted effort to deliver affordable housing.