While Israeli Prime Minister Binyamin Netanyahu tours Silicon Valley and extolls the achievements of the start-up nation, the high cost of buying a home in Israel is having a damaging impact on the country’s hightech sector.
“The rise in home prices in high-tech areas in Israel is costing human capital, and driving emigration by employees in the industry,” lamented Bank Leumi deputy CEO Prof. Daniel Tsiddon at the Landmark Ventures’ Israel Dealmakers Summit 2014 in New York this week.
How much have prices risen? Tsiddon asked: “In the past seven years, the price of an apartment in Tel Aviv has doubled compared with the price of a house in the alternative location for a high-tech person — in California’s Silicon Valley.”
“Without government involvement, Israeli high-tech cannot bring about sustained economic growth,” he continued. Israeli high-tech could narrow social gaps, Tsiddon agreed, but only under the right conditions.
He cited as an example the high-tech park that opened recently in Be’er Sheva, which promises to transform the capital of the Negev into a global cyber capital.
“The expected move of R&D centers to Be’er Sheva is something that can trickle down and assist the progress of poorer populations,” he said. “The spread of innovation across wider geographies and among segments of the population which have not yet been exposed to it will foster growth and narrow economic gaps.”
He advocates government intervention to boost growth. That, Tsiddon says, means stabilizing the exchange rate, bringing in more Israeli investors and increasing the rate of investment by lowering regulatory barriers.
Tsiddon offered a sobering view of Israel’s current economic growth, in general.
“If we exclude high tech and the gas discoveries, Israel has had almost zero GDP growth per capita, and that is not really a comfortable environment that invites innovation. The rise in inequality and the very slow growth in other sectors of the economy reduce the chances that the flourishing of high tech will trickle down and benefit poorer segments of the population.”