Back in July 2016, Israel’s Finance Minister Moshe Kahlon declared that Israel’s real estate market was in a bubble and that it will burst soon. It has been two years later, and we are still waiting for this supposed bubble to burst. Of course, Kahlon is not the first person to claim that Israel’s market was in a bubble or was about to crash. The Bank of Israel has warned in recent times that Israel’s housing market is one of the main threats to its long-term financial stability. This warning has been told many times throughout the years. The Bank of Israel and Kahlon may not be wrong about Israel’s real estate market being in a bubble, but they were wrong about the timing of this “burst” and the extent of the burst.
Israel’s real estate market does not necessarily need to burst to correct itself. Deflation is another alternative. Deflation would allow for prices to come down gradually over a period of time, while a burst would create a sudden shock in the market. Of course, no one knows for sure when Israel’s real estate market will deflate or pop, that is how the financial markets work. Israel is starting to see a minor deflation in its real estate market. The overall housing prices in Israel saw a very small drop of 0.1% over the past few months, according to a report published by the Central Bureau of Statistics. Finance Minister Moshe Kahlon attributed this decline to the mass production of homes over the past year, especially since construction leaped from an annual average of 30,000 units built in previous years to 130,000 made this year. The Israeli government’s hiring of foreign construction companies and increased access to title lien searches have also contributed to this trend. According to True Title, a Title company Florida, title issues must be cleared up to transfer ownership of the home from the buyer to the seller.
Israeli Finance Minister Moshe Kahlon sees this overall drop in Israel’s real estate market as a victory for young couples who are searching for an opportunity to own their own home in Israel. He is claiming this slight decline as a victory for young couples.
Another factor that has influenced Israel’s real estate market has been Kahlon’s war against real estate investors. Initially, real estate investors were benefiting from low-interest rates to fund their purchases, and they accounted for around one-third of all deals in the housing market back in 2010. Kahlon tried to push investors out of the real estate market by implementing a tax on people who owned three or more homes. He also provided tax benefits for people who moved their money from the housing market to the stock market (the bills stalled) and through the Buyer Fixed Price Plan, which offers a discount only to people buying their first home. As the dust settled, we can see that the ministers’ war against investors was a numerical success.
As we are beginning to approach the end of 2018, it will be exciting to see how Israel’s real estate market will fare in the future.