Israeli builders are finding it increasingly difficult to compete in the global housing market despite years of hard work and years of government subsidies, a new report says.
In a report published Wednesday, the Center for International Policy (CIP) found that Israeli firms are failing to compete effectively with foreign firms in the world of residential construction, which includes the booming commercial and residential sectors.
Israeli firms have spent billions on overseas projects and built thousands of homes for Israeli citizens.
But CIP said they have not been able to compete against international firms who have come to the country with millions of dollars in private funding and built large-scale residential projects.
The report found that a lack of knowledge about the construction industry has resulted in Israeli firms failing to properly supervise their contractors.
“The Israeli construction sector has been hit hard by the recent economic downturn and the lack of investment in the country.
While foreign companies have come in with billions of dollars of private funding, they have been unable to properly manage the entire sector, which is a critical element of the country’s economic recovery,” said Gadi Dror, a CIP analyst and former deputy director of the Israel Trade and Industry Ministry.
In the residential sector, Israel has been able expand at a pace comparable to other countries, but its construction sector is suffering.
The report said that a total of 17% of Israeli residential projects were built in 2014, which was less than the global average of 22%.
Israel’s construction sector also suffers from a shortage of qualified builders, lack of financing and a lack on training.
“It’s a sad situation,” said Elazar Fares, a member of the Israeli Construction Federation (IDF), who heads the IDF’s construction bureau.
“I don’t know how many houses have been built in Israel in the last 10 years, and they haven’t been built by Israeli architects.”
In addition to the lack in qualified builders and insufficient financing, Israeli companies are also struggling to meet the high-risk, high-reward requirements of the housing sector, with the Israeli construction industry reporting over 60% of its projects to be for sale or in decline.
For instance, construction firms need to have an average of 40% of their projects approved for high-value projects and 50% for medium-risk projects.
And they must have at least 30% of projects approved by the Israeli government and 50-75% by the local planning authority.
To compete in this new market, Israeli firms have been required to provide detailed plans and detailed timelines.
The CIP report noted that while Israeli construction companies have been able build large-size, high volume projects, smaller, medium-size and affordable projects have been left behind.
“In the private sector, the Israeli industry is facing a problem,” said Fares.
“It is still developing but they are not able to develop.
If they are able to start to develop, we would see the development of our sector.”
In the case of the residential construction sector, Israeli authorities are making it difficult for foreign builders to enter the country, according to the report.
For instance, the building industry’s lack of funding, insufficient training, and lack of oversight has made it difficult to establish new companies in the industry.
“We know that foreign investors are interested in Israel but they don’t have the right funding,” said Dror.
“So, what is the solution?
There is no solution.””
It is very difficult for Israel to build large scale projects.
We need to create more affordable housing in Israel and then the foreign investors will come to Israel,” he added.