Sami Peretz / What's Wrong With This Picture?

Only a serious economic or security crisis could bring down the housing market. But Israelis don’t fear a second Holocaust; they just want to be able to afford a second apartment.

There's that thing people do, you know when they show you a picture that's kind of off and ask, "What's wrong with this picture?" Take a minute and look at the photograph above, and ask yourself that question.

Look at the generic office festooned with green and yellow ads, the huge signs announcing "exclusive sales convention" and the lines of people looking especially interested in something.

No one is obviously aggravated, sweating or anxious, so this clearly isn’t a line at the Interior Ministry. But no one is getting anything for free here, either. On the contrary.

This is a picture of a conference sponsored by a construction company. It wants to sell apartments it's building, and in recent years there have been more than a few of these events in Israel.

In a sense, there's nothing special about this picture – just your average Joes looking to buy average apartments in an average community. 

Still, there's something wrong about it. It's that people are there in the first place, in large numbers.

Anyone who reads the papers or listens to our leaders, to economists or to anyone who has an inkling about anything going on in Israel knows that the conditions aren't ideal for buying a home. And not just due to the inflated prices.

If anything, anyone listening closely to the public debate about Iranian nuclear power should grip his cash tightly, deposit it in a safe, far-flung place and not squander it on four walls he can't afford.

From the day of Israel's establishment, the country has gone from one war to the next. It sees sporadic sparks of peace that fade quickly. We have withstood these wars, we endure terrorism, and we have also witnessed rapid rebound. Apparently, we're immune.

But in the last year, the discussion about a possible military strike on Iran's nuclear facilities, the Israeli PR campaign for it and the opposing voices -- including those of former intelligence officials who are usually expert at staying mum -- have unleashed a completely insane dialogue here. This is not another Six-Day War; it's something else. Something existential. One big uncertainty. What are level-headed people supposed to do when confronted with such uncertainty, when the threat of a second Holocaust trickles into everyday conversation? Well, not buy an apartment. Now would be the time to hold on to your cash, if not pick yourself up and move to a safer place.

The siren song of low interest rates

Hundreds of thousands of Israelis who have bought apartments here in recent years seem to have thought differently – if they thought at all. Something propelled them into the housing market with great force. And that something was very cheap mortgages.

The price of an apartment is built of the cost of the land, the cost of construction and the cost of financing. Over the last decade, Israeli governments have seriously blown it by selling only half of the plots of land they needed to, based on demand in the market. At a certain point, when the Bank of Israel slashed its benchmark interest rates in 2008, making the financing part of the equation more attractive, Israelis flocked to buy new homes.

Some buyers wanted an apartment to live in, but more than a few others simply couldn't accept the fact that the bank would be paying negligible interest on their hard-earned cash. Israelis don’t like it when their money isn't working for them, so they put it to work in the housing market. Some of those investors quickly discovered they had made deals of a lifetime. An apartment bought for NIS 800,000 was worth a million a year later, and then worth another NIS 100,000-200,000 two years after that.

And like on the stock market, when someone makes a killing, others follow suit and it becomes a national sport. Apparently, the feeling one gets after buying a dingy four-room apartment in Hadera or Gedera and turning a nice profit on it is addictive. It gives people the feeling they know how to do business, they understand real estate, they know how to make progress. Such a situation benefits the government, which rakes in tax revenues while giving buyers the impression they're wealthy, which dampens "social-justice" murmurs. And not just for a moment, but over two or three years, maybe more.

The downside to the current housing prices is that hundreds of thousands of Israelis won't be able to fulfill their dreams of becoming homeowners and are instead forced to pay exorbitant rent. In the absence of the government's ability or desire to provide affordable housing solutions for the masses, the only thing that could bring this dream of owning a home within reach would be a serious economic or security crisis. That's the only thing that could bring down the housing market. 

The long lines at the apartment sales conference indicate that that danger isn't acute enough yet, and that the Israeli public is ignoring its leaders' threats. Israelis don’t fear a second Holocaust; they just want to be able to afford a second apartment.