House in Ra'anana 311.
(photo credit: Uriel Messa)
Foreign investors, including many New Yorkers, snapping up property in Israel
may be making a mistake, the New York Observer warned Monday in a review on the
Israeli real-estate market entitled “Is Israel the new Dubai?”.
comparison is not particularly flattering, given that the real-estate bubble in
Dubai left behind financial chaos in the emirate and sent stock markets around
the world tumbling.
New York Observer
correspondent Laura Kusisto cites
the Global Property Guide ranking of Israel as the hottest housing market for
the last two years and the sixth fastest in the third quarter. She also cites an
Associated Press report that said since four of the five markets where home
prices rose faster than in Israel were recovering from sharp drops, Israel was
effectively one of the hottest real-estate markets around.
“In Tel Aviv,
prices have risen 46 percent since the end of 2008 to an average of nearly
$600,000 for a three-bedroom home,” the Observer report said.
is up 15% this year to an average price of about $415,000.”
started flocking to the country to invest starting at least as far back as 2007,
though the special relationship between the city’s Jewish community and the
Promised Land of course goes back much farther than that,” the report said. “In
2007, foreign buyers made up less than 5% of the country’s total buyers, but
made one-third of luxury property purchases.
“But rather than celebrate,
the country is quivering with the fear that it will suffer the same fate as
overheated markets like Dubai and, of course, the US. Israel’s central bank has
raised interest rates several times in the last six months, hoping to pour some
cool water on the boom.”
“But before the latest wave of New Yorkers
decide to flock to the Promised Land, it’s worth pausing to reflect on the
perils,” the report said. “Experts there say the bubble is about to pop. Peace
is, you know, fragile. So is the country’s economy, which relies on a lot of
“Protest is also rising in the country, as many
locals find themselves unable to find an apartment,” it added. “Consider that
salaries in Israel are significantly lower than New York, but an apartment is
getting way more expensive. That could pressure the government to keep raising
interest rates or change some of its current strict construction restrictions to
allow for an increase in supply.”
The housing problems “helps explain the
government’s refusal to stop building settlements in the West Bank,” the
Observer report said.