Israel has selected Chinese and Portuguese companies, each with multi billions in revenue, to begin building multifamily developments to reduce skyrocketing housing prices. Nearly 50 European and Asian companies submitted bids last spring to government ministries for the contract that will begin in the coming months and last five years. The winning firms will be allowed to import up to 1,000 workers each. The Israel Builders Association has strongly criticized the program.
The companies selected are Everbright International Construction Engineering Corp., Beijing Construction Engineering Group, Jiangsu First Construction Corp., Jiangsu Nantong No. 2 Construction Engineering Group, China Haushi Enterprises Co. and Portugal’s Mota Engil Engenharia e Construction.
Among the firms that are ranked on ENR's Top 250 International Contractors list, Mota Engil ranks at No. 59, reporting $2.88 billion in total global contracting revenue last year, about $2.1 billion in its domestic market. It also operates in the Czech Republic, Poland and Peru. Beijing Construction ranks at No. 115 on that list, reporting about $7 billion in total worldwide revenue in 2015, all but about $624 million in China. Jiangsu Nantong also reports about $7.3 billion in global reveue, all but $416 million domestic.
Under the terms of the tender, each company will be required to have at least 100,000 sq meters of housing projects under construction by the second year of local operations, which will rise to 250,000 sq m by the fourth year. There is an option to extend contracts for three years. The firms will not be allowed to work on other types of construction projects. The dollar value of the contracts was not disclosed. To meet those targets, each contractor is expected to bring in up to 1,000 workers into Israel. According to program sources, they will be housed on site in prefab structures or in crowded apartments in Israeli cities.
Israel had intended to gain needed skills by allowing 20,000 Chinese construction workers into the country, but no deal could be reached with China's government, according to Israeli publication Haaretz.
“The companies selected have proven track records and technological capabilities that will enable far speedier construction using industrialized techniques not currently employed in Israel,” said Eshel Armoni, director general of Israel’s housing ministry. He added that the major aim is to reduce significantly the timetable to build thousands of new apartments. Haaretz says many of the structures will be built using prefabricated approaches.
According to the ministry, the foreign construction firms could generate more work for Israeli plumbers, electricians, plasterers and other skilled industry workers. But a leading economist doubts this will be the case. “The only way more work for Israeli contractors is if the government frees up much more land, so that the number of housing starts can rise sharply,” said Chen Herzog, chief economist at BDO Consulting, Tel Aviv.
Israel’s finance ministry has announced plans to approve a record 145,000 new housing units this year and build 55,000 new apartments. But Herzog cautions that the government consistently has failed to meet its targets, and he remains skeptical. Housing prices have more than doubled since 2008, making apartments out of reach of many Israelis. Finance Minister Moshe Kahlon so far has failed in efforts to bring housing prices down. They were up by 8% last year and are expected to rise by nearly as much this year.
The Israel Builders Association took the government to task for approving the entry of the foreign companies. “The move will endanger small and medium-size contractors who are building thousands of apartments throughout the country,” said association President Roni Brik. He said the only way to solve the bottleneck was immediately to bring in thousands of foreign construction workers. This number would be in addition to the thousands that are already in the country, primarily from China, Thailand and Ukraine.
