Ahead of Moshe Kahlon taking up his new job as chairman of the Israel Lands Administration, a new survey reminds Israelis of the absurdity of local housing prices.
The ninth annual International Housing Affordability Survey, conducted by Demographia, compares home prices in urban areas around the world using the simple "median multiple," or the area's median house price divided by gross annual median household income.
If an area gets a grade of up to 3 – meaning that a household can buy a home for the equivalent of three years of its annual pre-tax income – it is considered to have affordable housing.
A grade above 5.1 marks an area as "severely unaffordable."
The survey focused mainly on English-speaking countries, like the United States, Australia, Canada, Ireland, New Zealand, the United Kingdom and Hong Kong. The most expensive of these countries was, unsurprisingly, Hong Kong, a small crowded and wealthy island with a median multiple of 13.5 – off-the-scale expensive.
The United States and Ireland, after 50-percent plunges in home prices from their respective peaks, turned in "moderately affordable" median multiples of 3.1 and 3.2, respectively. In New Zealand, one of the least crowded countries on the planet, the median multiple was nevertheless a "severely unaffordable" 5.3.
And Israel? Since Israel wasn't included in the Demographia survey, we attempted our own calculation of the multiple median for housing prices here.
According to National Insurance Institute figures for 2010, the median monthly pre-tax income here is around NIS 5,500 per person and NIS 9,800 per household – that's NIS 117,600 per household per year. The median price of an apartment in Israel is slightly under NIS 900,000.
That puts the multiple median at 7.7, higher than the 7.2 it scores using 2009 data. Israel is not yet as expensive as Hong Kong, but in light of Demographia's international study, it’s fair to say home prices here are insane.
Demographia is owned by American transportation guru Wendell Cox, a proponent of private transportation and opponent of railway expansion and a fellow in a number of conservative think tanks – facts that should be kept in mind when viewing the conclusions of the study. Nevertheless, it's hard to ignore some of the study's conclusions, which include repeated warnings about the damage that high home prices and a shortage of affordable housing wreak on economic growth and birthrates. The report quotes from the research of Joel Kotkin, who told TheMarker that the housing crisis was one of the reasons for the declining birthrate in the industrialized and emerging nations.