Palestine Economic Policy Research Institute - December 31, 2009 - Back to Resources Page

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Economists suffer from a type of schizophrenia when it comes to
investment in residential housing. On the one hand, economic theory
favours investment in housing because it helps fulfill human and social
needs. It also helps reduce rent and therefore the cost of living and
inflation. Furthermore, investment in housing increases employment,
especially among unskilled and semi-skilled labourers, and increases
demand for building materials.

On the other hand, investment in residential buildings remains an
unproductive investment compared to investment in machinery, factories
or other productive means that generate a continuous flow of value-added.
Investment in housing is of a speculative nature due to the finite land areas
in urban spaces. Rarely has a study of the Palestinian economy been made
without agonising over the fact that the largest share of the total
investment in Palestine goes to housing (about 50% of the total investment
in 2007 and almost 70% in 1994).

To further complicate matters, owning a house has a particular sociocultural
significance in Palestine, perhaps more so than in neighbouring
countries. There is a general belief that owning a house protects the family
from life's worst adversities, even those particular to the Occupied
Territories. Once a family has a shelter, the breadwinner need only provide
the basic necessities, such as food and clothing. These basic needs can be
provided relatively easily, as families can adjust their consumption inline
with fluctuations in their income. In other words, owning a house in
Palestine is not only a matter based on the cold economic calculations of
cost and benefits.

Attachment	Size
housingandmortgage.pdf	124.73 KB

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Palestine Economic Policy Research Institute - December 31, 2009 - Back to Resources Page