Kati Sharett
Real estate broker in Israel

Is it time to buy an apartment in Israel?

high-rise Tel Aviv
high-rise Tel Aviv credit: Kati Sharett

I recently read an opinion article about the housing market in the US and applying it to what’s happening in Israel, speculating that the current high prices here may come down. The article subtly suggests it may be good to wait to purchase here.

As a real estate professional in Israel I would argue with that opinion.

Although the rise in interest rates is something that trends worldwide and does affect housing prices that is about the only factor where there is a real comparison. It is possible that the rise in interest rates for mortgages could have a tempering effect on housing prices here. But I believe it will not bring prices lower.

There are factors in Israel that are markedly different than the US. While housing starts, according to Forbes, have plunged 14.4 %, housing starts here in Israel are controlled by the government release of land. One of the hard reasons for the rise in prices in Israel is there has been a long shortage of available housing in moderate prices. The population in Israel is growing through the birthrate and immigration while birthrate in US drops and immigration in the US is by mainly refugees who don’t enter the housing market.

Another astonishing factor in the Israeli housing market is the shortage of available rental property. When a mortgage payment becomes less than the current rent in each area the prudent option is to take a longer mortgage period and not pay more for rent. There is an abundance of rental housing in the States that is readily accessible whereas in Israel there is a distinct shortage of family-sized rentals of 3-bedroom units country wide where in the main population centers of Tel Aviv, Jerusalem and the coast like Netanya and Hadera, prices of rentals for 4-room units have risen as much as 20% since 2021.

In Israel the government for the last few years has taken steps to discourage individuals from buying investment apartments with a high purchase tax on the front end and capital gains on the selling end. This was done to try to temper housing prices. Now there is a shortage of rental units as the majority of rentals are held by Mom-and-Pop investors.

The rental housing project of Halomot arnona In Jerusalem’s Arnona neighborhood has filled all of their units for a decade to come, a friend of mine recently added herself to the waiting list and is now at #400 in the list of those waiting for a 4-room apartment.

The shortage of rental housing encourages couples to make every effort to enter the housing market even at the lowest price points which is pushing the bottom up in a rapid surge. I have personally seen through my own business, prices for the lower end (3 and 4 room units from 1.3 million shekels to 1.6 million shekels) in the coastal region of Netanya and Hadera go up more than 15% in six months with prices seeming to rise monthly.

Another important factor in the short term is the jump in the value of the dollar which many believe will be very short lived. Those who have funds in dollars would do well to cash in now to purchase housing while the dollar is purchasing more shekels. Those who held euros and waited to buy have seen their value drop recently by more than 10%.

Another recent development in the housing industry here and the US is the serious jump in materials cost. The causes for that will likely not see the prices in such materials go down. Builders and remodelers have commented that prices of hardware for housing such as sinks and faucets and tile and wood for cabinetry have jumped 25% since last year which cause the prices of new housing to be higher.

Housing builds in the US is often a speculative business with builders creating housing for potential buyers who will enter the market.  Here the majority of high rises that are being built are often sold out before the hole is dug and the government demands that the builder/developer be fully backed by the bank even as cash flow increases.

When there is a softening in the market it usually affects the high end first. Here the high end of over 4.5 million shekels does take longer to move on the market but the base prices which are now 2-2.5 million are being snapped up quickly in the secondhand market as well as the new.

When I entered the real estate profession here it was on the heels of the large Russian Aliyah in the 1990’s. Many speculate there may be another wave of Aliyah coming as the world situation looks gloomier post covid pandemic. Although the Russian Aliyah brought its own housing crisis over time the large influx of population pushed the prices up which I speculate may well happen again here.

About the Author
Kati Sharett works as a licensed realtor in Israel and writes on real estate news in Israel since 2009. A graduate from the University of Wisconsin in 1994 in Hebrew Studies and Journalism, she previously worked in news. She made aliyah with her family in 1995. She also writes about Mediterranean cuisine. She has lived and worked in Tel Aviv and greater Jerusalem.
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