In a review on the Israeli real estate market entitled "Is Israel the new Dubai?", the "New York Observer" warns that foreign investors, including many New Yorkers, snapping up property in may be making a mistake.
The comparison is not particularly flattering, given that the real estate bubble in Dubai left behind financial chaos in the emirate and sent stock markets around the world tumbling.
"New York Observer" correspondent Laura Kusisto cites the "Global Property Guide" ranking of Israel as the hottest housing market for the last two years and the sixth fastest in the third quarter. She also cites an "Associated Press" report, which pointed out that since four of the five markets where home prices rose faster than in Israel were recovering from sharp drops, Israel was effectively one of the hottest real estate markets around.
"In Tel Aviv, prices have risen 46% since the end of 2008 to an average of nearly $600,000 for a three-bedroom home. Jerusalem is up 15% this year to an average price of about $415,000."
The "New York Observer" adds, "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% 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 US. Israel's Central Bank has raised interest rates several times in the last six months, hoping to poor some cool water on the boom."
The "New York Observer" cautions, "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."
The paper also observes, "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."
The "New York Observer" concludes that the housing problems "helps explain the government's refusal to stop building settlements in the West Bank."
Published by Globes [online], Israel business news - www.globes-online.com - on November 9, 2010
© Copyright of Globes Publisher Itonut (1983) Ltd. 2010