Without Tel Aviv cafes I would have nothing to blog.
Because over seemingly endless cups of frothy hafooch (read: Cafe Ole) sipped in the company of friends and colleagues, I glean information and material.
This week, once again, economy is on the radar. Not a surprise when day after day the headlines lead with stories of impacted world markets in the wake of the U.S. Wall Street collapse.
Israel’s market hasn’t yet fallen flat – the Tel Aviv Stock Exchange (TASE) dropped a modest 5.9% for the week – but fallout predictions are grim and a collective eye is keeping watch over economic events as they evolve.
My friend “M“‘s current situation, viewed in lieu of today’s headline: Housing Market and Consumers on the Ropes – is particularly apt. This is her story, shared over coffee:
M worked in upper management at an Israeli bank for two decades. As she tells it, the last few years were hellish – she was bored, the job setting no longer appealed and she was more interested in stepping into the fixer-upper end of private investment real estate.
So M devised a plan: Convince her higher ups to lay her off AND pay her a handsome severance package and in the interim study up on Israel’s private sector real estate laws. After receiving her settlement check, invest in prime Tel Aviv real estate, refurbish her purchase and sell it for an estimated $50,000.00 profit.
That was back in April and M’s plan was skating along swimmingly; she had purchased and fixed up a 2-bedroom Tel Aviv apartment and she released it onto the market in September. The rapid increase in value over the past few years in Tel Aviv’s housing market further bolstered her confidence in the plan.
And then Wall Street went into freefall.
“The phone has stopped ringing,” M pursed her lips, worry lines furrowing her forehead. “Israelis aren’t being hit as hard as Americans but right now they’re terrified so they’re holding onto their money. Nobody’s moving. Everybody’s watching how this is going to play out. They’re frightened and frozen.”
M concedes she’s in an impossible place, “If I lower my asking price I lose my profit margin and what good is that? But the severance money is running out and in about two months the mortgage on the investment property is going to start killing me. And I mean that. I won’t be able to pay it.”
Do you know what you’re going to do? I asked.
“Not at all,” she uttered quietly, exhaling frustration into a balled fist.
On one hand, if there is a drop in the current over-inflated Tel Aviv property values it’ll be a relief. The prices are ridiculous.
On the other hand, if there is a drop, people like my friend M will lose. Maybe even big time.
So in the interim, watching and waiting continues. . .