Israel is the fastest growing real estate market in the world right now. Foreign investors — including many a New Yorker — are snapping up property in the often troubled paradise. But that might be a mistake.
Global Property Guide ranked Israel the hottest housing market for the last two years. In the most recent quarter, the publication reports that house prices in the country rose the sixth-fastest in the world. But four of the five were recovering from sharp drops, notes the Associated Press, meaning the nation of six million could have 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. Jerusalem is up 15 percent this year to an average price of about $415,000.
New Yorkers 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. In 2007, foreign buyers made up less than 5 percent 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 United States. Israel’s Central Bank has raised interest rates several times in the last six months, hoping to pour some cool water on the boom.
There are a few reasons it makes sense that Israel’s market would be booming. The country’s banking system has been far more stable than ours, even if its political situation is famously not. The flood of nearly 1 million Russian immigrants also increased demand for housing stock to a degree that’s almost unimaginable here. In neighborhoods like the one near Tel Aviv’s Central Bus Station, immigrants still cram several families into one apartment, unable to find or afford an apartment.
But before the latest wave of New Yorkers decide to flock to the promised land, it’s worth pausing to reflect on the perils. 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 American investment.
Protest is also rising in the country, as many locals find themselves unable to find an apartment. 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.
At least this helps explain the government’s refusal to stop building settlements in the West Bank.
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