The world financial crisis of 2008-2009 had everyone expecting the Israeli housing market to suffer in line with the rest of the world. But prices kept going up while global real estate prices plummeted. A growing need for apartments coupled with scarce availability, with money pouring out of the financial markets, meant a boom for Israeli real estate. Prices of Israeli real estate have been climbing at a higher rate than normal for the past 17 months. The question is, are prices poised for continued growth, or are we nearing a top? What keeps driving Israeli real estate prices higher?
What’s pushing prices up?
Israel’s real estate market has unique pressures that have historically kept the prices steadily rising:
- The psychology of the Israeli real estate buyer almost never allows him to sell at a loss, which keeps prices from dropping.
- The majority of the undeveloped land is owned by the government, who releases new land for development very slowly, keeping land values very high.
- The majority of Israelis own their own home and live in it. This creates a continual shortage of homes to buy.
- Israel’s population continues to grow organically and as antisemitic pressure mounts in the world, there is an injection of new immigrants, increasing the need for homes.
- Foreign investors continue to buy real estate in Israel because of the market strength, the security that comes from owning real estate in Israel, as well as spiritual and Zionist reasons.
Faced with this continued hike in home prices, the Bank of Israel and government offices have made several moves to halt the real estate price inflation. Loan criteria are stricter and purchasers now have to come up with higher down payments. But buyers are still buying. The Housing Minister has released more land for building, however it will take a long time until this new land is developed and properties are built. Interest rates continue to be very low, and while the Israeli financial market has weathered the storm fairly well, there is constant pressure to keep the interest rates low until this global crisis is over. For now, this will keep local and foreign buyers purchasing real estate.
2010 could be the year where the Israeli housing market starts to see a drop in prices. Many experts thought that would happen in 2008 or 2009 and yet this was not the case. So far prices continued to increase. Still some warn that prices are now too high, and with the steps taken by the government, the market could see a decline by the end of the year.
In summary, Israeli real estate prices have been rising for the past few years. There are several inherent factors that have caused this increase, some of which will continue on for years to come. The government believes that current prices are inflated, but so far, buyers aren’t listening. Experts are divided on whether the current measures taken by the government will cause a plateauing or drop in price levels in the next year.
{ 4 comments… read them below or add one }
Love your website. Lots of good information.
When prices start to go down, let me know.
The prices started to go down.
In 2012 the prices will decrease to the level of year 2008.
it will be a very big bubble and it will go down.