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Is Israel's Hot Real Estate Market Heading for a Dubai-Like Fall?

Is Israel's Hot Real Estate Market Heading for a Dubai-Like Fall?


Israel is the fastest growing real estate market in the world right now, according to Vienna, Austria-based Global Property Guide.

But some analysts speculate the astronomical property price rises in that small Mideast country could create another Dubai-like scenario where prices went south in a hurry.

Still, the New York Observer writes foreign investors, including many New Yorkers, are snapping up property in a country that is just a little larger than the entire state of Massachusetts.

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, the Observer states.

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  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," according to the Observer.

"Experts there say the bubble is about to pop," the newspaper 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," according to the Observer.


Peace is fragile. So is the country's economy, which relies heavily on American investments.

Protest is also rising in the country, as many locals find themselves unable to find an apartment.

Salaries in Israel are much lower than in New York but the price of an apartment continues to increase.

"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 Observer notes.   

 

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