The Bubble That Would Not Burst

Predictions that Israeli house prices would fall once the government’s major construction projects hit the market have been proved overly optimistic. Excepting certain areas where the heat has gone out of the expensive housing market – Tel Aviv, Jerusalem, Ra’anana and Herzliya – house prices in Israel have continued to rise by 0.6% since February 2019.

The map of the Israeli real estate market is complex and influenced by many different factors, such as the construction of new public transport networks and population trends. The Kahlon Buyer Fixed Housing Plan led to the accelerated construction of new homes in Kiryat Bialik (a Haifa suburb), Beer Sheva, and the southern towns of Netivot and Dimona, but the demand for housing is stronger elsewhere, where prices are not affected by the increase in supply.

The district index measures changes in house prices in six districts, shows prices remaining stable in Northern Israel and Jerusalem, increasing in the Haifa district by 2.8% and in the south (around Beer Sheva) by 1.3%, and in the Central district (excluding Tel Aviv) by  1.2%, but falling in Tel Aviv by 2.3%.

clthough housing prices fell between late 2017 and early 2018, when investment purchases paused for a few months, the overall trend remains upward. This is driven, as we have said before, by strong demographic growth and Aliyah, as well as confidence in the Israeli economy and incoming investment. Although the overall supply of housing has increased, the new apartments were not built where they were needed. There is still a shortage of housing in Tel Aviv and Jerusalem, in charedi towns and in Arab communities, where there are no plans to build new homes.

Unless the incoming government’s housing policy is radically different from the last, we are unlikely to see a fall in demand or prices in the years ahead. We may see some cooling off of real estate prices in the most sought-after cities, as some of the demand is drawn away by new construction elsewhere. However, while employment continues to draw Israeli families to live where their jobs are, the center of the country will remain the strong beating heart of the Israeli housing market.

If you are interested in investing in property in Central Israel, talk to Shaun Isaacson from Creative Estates Israel about the best locations for buy-to-let investment and home purchase, or if you own a property in Israel already and need a reliable management agent.