Even as the Ministry of Housing and Construction energetically promotes a proposal to subsidize mortgages for young couples to buy their first home in the periphery, it should be remembered that other factors are also responsible for making the desert bloom, and one is investment in infrastructures.
What is the difference? Whereas lower mortgages will attract price-sensitive buyers, who are potentially economically weaker as well, an improvement in infrastructures can provide greater access to central Israel and to better jobs for car owners - which means an economically stronger populaiton.
"Our approach is the economic approach, in line with the OECD approach, which favors investment in infrastructures over tempting the individual to go to the periphery without giving him or her employment and educational possibilities," a Ministry of Finance source told "Globes" last week.
Nonetheless, neither the Ministry of Transport or the Ministry of Finance have carried out any systematic studies to examine whether the improvement in transportation infrastructures has boosted housing demand, although the Ministry of Finance's Budget Department directed "Globes" to accumulated global experience, which indicates higher prices for commercial real estate near railway stations, for example.
This is where the Israeli story starts. When gasoline costs over NIS 7 per liter, and Minister of Transport Israel Katz constantly says that the solution is building roads and encouraging public transport, it is interesting to look back and examine whether what has been built to date has changed anything, and whether access to better transport for a community has boosted housing demand in it, translating into higher home prices.
Three basic factors are the opening of new train stations, the privatization of bus routes to new bus operators, and the building of new roads, including Road 6 (the Cross-Israel Highway toll road).
Binyamina is a beneficiary of Road 6, as well as a nearby train station. Ehud Meiri, chairman of an eponymous assessor firm, says that home prices in the town have risen 150% in the past five years, due to the shorter travel time to Haifa and Tel Aviv. "Today, travel by train to work in Tel Aviv takes no longer than the time needed from Petah Tikva to Tel Aviv," he says.
Gedera established itself as the southern border of central Israel (from Hadera to Gedera), thanks to Road 6. Meiri says that Gedera was on the margins and considered closer to the south, but it has taken in families from the center "who consider Gedera as part of the center, but greener, where it is possible to buy a private house with a garden at a reasonable price." Home prices in the town have risen 115% over the past five years.
A similar rise in home prices - 110% - has occurred in Pardess Hanna, a few kilometers from Binyamina, and also close to Road 6. Meiri says that the local authority is seeing demand mainly from young couples and people seeking better homes at reasonable prices in a rural environment. In general, Road 6 serves as a good test, since communities along its route have had strong prices rises for homes, albeit it is not certain that prices did not rise before in expectation of the improvement in the transportation infrastructure.
In the south, assessor Nehama Bugin points to a common denominator for cities and towns such as Beersheva, Yavne, and Ashkelon. "They all have much better access. In my opinion, the 20-25% increase in prices is due to better access. It's possible to sense the importance of access when talking with developers."
Ashkelon may reflect the relative security calm, but Anglo-Saxon Real Estate Ltd. also says, in recent years, apartments have been bought in towns to the south, such as Netivot and Sderot, thanks to the railway line reaching Ashkelon.
"Despite the rise in apartment prices in the city, Ashkelon is still cheaper than Ashdod, and is accessible to Tel Aviv by railway," says Anglo-Saxon Ashkelon franchisee Miki Peri. It isn't that Ashdod (which has privatized public transport) has been abandoned. "The effect on home prices there is as significant as in Ashkelon," says Bugin.
Beersheva is seeing a similar trend. "There are already luxury high-rises in Beersheva where apartments cost up to NIS 3 million," says Bugin. "It's possible to attribute this to wealthier people coming to town, for whom it is convenient to take the morning train to Tel Aviv."
A second railway station was opened in Beersheva in 2000 (Beersheva Central), and the bus lines to Tel Aviv were privatized two years later to Metropoline Public Transport Ltd., which greatly reduced fares. The nearby town of Lehavim also benefits from the trend.
In central Israel, new lateral Road 431 affects the residential map. Opened in 2009, the road links the southern part of the Dan Region with the Coastal Plain, connecting Road 20 (the Ayalon Highway) with Road 4, Road 40, Road 42, Road 1 (the Jerusalem-Tel Aviv highway), and Road 6, from Rishon LeZion all the way to Modi'in. One of the towns the road passes by is Ness Ziona (by the Rishonim railway station), an alternative residence for young couples who do not want to live too far away from the Dan Region. "The road also links Ness Ziona to the national highway network, south to Ashdod, east to Modi'in and Jerusalem," says Meiri. He adds that home prices in Ness Ziona have risen 140% in the past five years, with the construction of new neighborhoods near the town's science park.
Modi'in, the terminus of Road 431, is growing rapidly. In addition to its strategic location midway between Tel Aviv and Jerusalem (an "ideal location", says Meiri), it benefits from Road 431, as well as from the privatization of its public transport and the opening of two railway stations (Modi'in in 2007 and Modi'in Center a year later). Meir says that it is no coincidence that home prices in the city have risen 70%, a rise he calls "gradual" and "fairly low", as the city develops, and tenders are published for land.
This is only a partial picture, both because access has improved in the past ten years in other locations, and because it is difficult to isolate this factor from all the others and see it as the only cause for rising home prices in these towns. However, the Ministry of Finance agrees with the argument that strong populations should be attracted to the periphery by means of investment in transportation (and in jobs), which is why it opposes subsidizing mortgages in the periphery.
As for the jobs side, Ministry of Finance officials are discussing a joint plan with the Ministry of Interior and Ministry of Industry, Trade and Labor to make certain industrial zones in the periphery more attractive through tax breaks to give them an edge over the center.
Published by Globes [online], Israel business news - www.globes-online.com - on February 28, 2011
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