OECD warns on Israel's high risk real estate

"The real estate sector risk is high, and the banks' involvement in the sector continues to be very deep," OECD economists write.

By GLOBES/AMIRAM BARKAT
November 29, 2017 08:23
1 minute read.
Beit Shemesh

In Beit Shemesh, overlooking the valley from the northeast, construction of 14,000 planned housing units is now in full swing. (photo credit: EVE FINKELSTEIN)

 
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The Israeli government should continue its policy of maintaining economic stability, in view of the rapid increase in real estate prices, the Organization for Economic Cooperation and Development (OECD) recommends in its global economic survey published today.

"The real estate sector risk is high, and the banks' involvement in the sector continues to be very deep," OECD economists write, noting that Israel should take cautionary measures, given the country's unstable geopolitical environment.

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In the section devoted to Israel, the OECD recommends that the Bank of Israel take measures towards an interest rate hike, given the ongoing increase in wages. The organization's economists believe that the era of negative inflation in Israel has come to an end, with annual inflation set to reach 1.75% by the end of 2019.

According to the review, the growth rate in Israel will accelerate in the coming years to over 3.25% a year. The main economic engines in the economy are likely to be domestic demand, referring to private consumption, and a rapid increase in wages resulting from the historic low in unemployment. Another support for economic activity is likely to come from the Leviathan natural gas reservoir, which will begin supplying gas in late 2019.

This article was first published in Globes.

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