Famous businessmen have purchased a building in the heart of Tel Aviv for a coll $12.5 million. Who says that there is a real estate slowdown?

According to Ynet: “The existing building has three stories and includes 14 apartments, each measuring 80 square meters (861 square feet) in size. The plan is to renovate the existing building and add three floors. The 14 existing flats will be reduced to 10 over a larger area, and will be joined by 12 new apartments, each measuring 80 square meters. In addition, several luxurious apartments are planned: A garden apartment of 180 square meters (1,937 square feet), including a garden of 150 square meters (1,614 square feet), as well as another penthouse which will be built on 240 square meters (2,583 square feet), including six rooms. In total, the building will consist of 22 apartments.”

The developers are hoping to to generate a 6% return for renting out the apartments. While for many outside of Israel that sounds pretty low, by Israeli standards that’s actually on the high side, as most money in Israeli real estate is made via capital gains.

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As if we need more proof that Israel is quickly falling into the global economic mess, more data released today shows that this is indeed happening. According to Globes: “The national average gross salary fell to NIS 7,790 in November 2008 from NIS 7,812, the Central Bureau of Statistics reported today. The average salary fell by an annualized 3.5% in September-November, while the number of Israeli employees rose by an annualized 1.2% in the same period to 2.8 million. The number of wage-earners including Palestinians and foreign workers was 2.91 million. Although the effects of the recession are already showing up in the salary data, they are not yet seen in the Central Bureau of Statistics’ employment figures. A big wave of layoffs began in December.”

With the headlines full of company announced layoffs, this looks like a number that may continue dropping quickly.

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As if we didn’t know that the Israeli economy has slowed to a crawl, a report by employment agency Manpower shows a sinking demand for Israeli workers. According to a report in Globes: ” The company reported that, in December, total demand for workers fell 6.8% in comparison with November, and by 19.1% in comparison with December 2007. In comparison with 2007 as a whole, total demand for new workers in all sectors of the economy fell by 6.2%. “  The article continues, “Demand for workers in high tech fell 9% in December in comparison with November, and by 6.8% in comparison with 2007 as a whole. In both cases (total demand and demand in high tech) the December figure is the lowest in annual terms since 2004.”

I would expect to see this number continue to fall in the coming months, as Israel seeks deeper into an economic slowdown.

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Will the real Bank of Israel Governor please stand up? A week after telling us that everything is just peachy re: the Israeli economy and Israeli banking system, all of a sudden Globes is out with an article that Fischer is now ‘worried.’ The article says, “We expect 2.7% growth in 2009, and we’re accused of over optimism. In such times, if you want to be serious, you should be worried, and I am really worried. Wise men won’t tell you that there is nothing to be worried about,” said Governor of the Bank of Israel Prof. Stanley Fischer last week during a meeting of the EU-Israel Chambers of Commerce and Industry held at the home of the Ambassador of France.”

I guess Fischer figures that the Israeli public isn’t fluent in French. As posted here last week Fischer said that Israeli banks were in good shape. If so then why did he tell the Chambers of Commerce  that, “There will probably be a period of a rise in unemployment, a drop in the growth rate, and some companies will find it difficult to raise capital. These things happen during a slowdown. Some companies will find it difficult to obtain credit.”

Why should it be hard for companies to get credit if the banks are safe and sound????

Gov. Fischer, please just level with us.

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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.

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