"No country in the world has done more than Israel to cut regulatory obstacles. On the other hand, the real estate sector, which is currently controlled by the Ministry of Finance, does not enjoy that same drop in obstacles. Planning committees, the local authorities and the bodies responsible for real estate policy are not working in coordination with each other and each one operates at its own pace. The same Israeli ambitiousness that has made us so successful in high-tech seems less suitable for the real estate market and the efforts by the Ministry of Finance to tell the free market what will be the final price of an apartment has brought about a reduction in construction standards. It's pretentiousness led by politicians to think that it is possible to invent a price mechanism," Eli Groner, the former Director General of the Prime Minister's Office said this morning at the Global Real Estate Conference organized in Tel Aviv by international law firm DLA Piper.
This was Groner's first public remarks since he was appointed Managing Director of the Israel office of Koch Disruptive Technologies, the venture capital arm of Koch Industries.
Speaking about his new appointment, Groner said, "In the past few months, as part of the new job, I have seen a lot of opportunities for entrepreneurs who want to develop alternative markets. I have been exposed to a range of new technologies. Entrepreneurs that are trying to take advantage of the electromagnetic field, so as to be able to speed up the rate of cultivation and germination of seeds. I show this to the Koch brothers and they are amazed. We are talking about a range of new technologies and not only in cybersecurity."
Groner added, 'If you want to guess in which direction the world is advancing you have to invent - and Israeli entrepreneurs are today inventing the future and I have no doubt that it will also extend to real estate. I am certain that whomever wins the election will continue to encourage investments, international investments, and that it will continue to encourage a free market. In that way we can ensure that the global market will continue coming to us and not just because of the beach and nightlife but because of the opportunities to make a profit and do deals."
As part of the conference organized in Israel by DLA Piper for each of the past seven years, research was published, which found that 2018 was a record year for commercial real estate with deals worth $733 billion - the highest figure since 2007. However, those answering the survey expressed pessimism about record investment continuing in 2019.
DLA Piper, which employs 4,900 lawyers in 99 offices in 45 countries worldwide, conducted the survey among hundreds of senior executives in real estate in the US. The survey found one especially surprising forecast, which is that in the next 12 months real estate investors from Israel will surpass real estate investors from China in the volume of their investments in the US. The survey even provided answers to some of the questions currently preoccupying the entire real estate sector: where it is worthwhile to invest and in what branches?
58% of those taking part in the survey see a 'bearish' commercial real estate sector compared with just 40% last year. This is the first time since 2011 that most of those taking part in the survey, which has been regularly conducted for 10 years, have expressed a 'bearish' viewpoint on the world real estate market. The survey found that 30% of respondents mentioned the uncertainty regarding US administration policy on both domestic and international policy as a reason for concern; another basic reason for concern among 28% of respondents was about a 'correction' in the real estate market after years of rises in line with fall in the level of demand; while 20% mentioned the rise in interest rates as a cause for concern. Almost all respondents (90%) said they see interest rates continuing to climb in 2019, which would also directly influence the prices of transactions.
Among the factors which will influence the commercial real estate market, the global economic slowdown was mentioned generally (54%) and in the US in particular (52%); trade wars between countries worldwide (52%) and in particular with China (49%) and the UK Brexit (21%). On the other hand, when asked for reasons for optimism, 48% of respondents expressed their belief that available surplus capital for investment will continue to drive deals, and that ultimately US economic power would overcome political uncertainty.
The survey also asked respondents their views about the most attractive cities for investment over the next year and found that despite Brexit fears, London was crowned the most attractive capital city for investments, followed in the ranking by Berlin, Frankfurt (which lost its joint place at the top from last year), Hong Kong and Sydney.
There is also an Israel angle: the survey found that Israeli investors are expected to surpass Chinese investors this year for the first time in the volume of their real estate investments in the US, with 24% of the investments in the country, up 6% from 18% last year.
Published by Globes Israel business news - en.globes.co.il - on April 3, 2019
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