Israel’s Robust Economy Is Linked To Its Burgeoning Real Estate Market

Even during the darkest days of the global economic meltdown, the value of Israeli real estate properties across the entire country continued to rise. The combination of low-interest rates and the limited number of affordable new apartments in major cities and towns, created the perfect real estate storm for local and foreign buyers.

Statistics provided by the Building Contractors Association to the Israeli business daily GLOBES noted prices for apartments and homes in major cities across the country rose anywhere from 3 to 17 percent during the course of 2009. Fears about an “Israeli real estate bubble” went unfounded during the first quarter of 2010, as prices continued to rise by an additional 3 to 7 percent.

Israel building companies, large and small also found that their bottom lines were being positively affected by the emergence of “purchasing groups.” These groups, consisting mostly of middle-class local and foreign buyers, offer to purchase a block of homes or in some cases an entire apartment complex, if the company is willing to offer pre-sale discounts (ranging from 10 to 25 percent). Several building companies have been able to secure tens of millions of dollars from “purchasing groups” in the form of goodwill pre-sale purchases, even before the first tractor has driven a shovel into the ground.

Recognizing that the falling numbers of major construction projects in Central and Northern Israel was also creating a situation where many young couples were on the verge of losing their ability to purchase an affordable dream home, Israel’s Housing & Construction Ministry recently released state-owned lands for construction. By the end of May, the government had released enough land for the construction of at least 4,000 new apartments during the next year. The Ministry intends to double that figure by the beginning of next year.

Compared to apartment and home prices in the metropolitan New York region, Israeli property is still a bargain. Buyers and/or investors can purchase a brand new four-room apartment in many cities/towns close to Tel Aviv and Jerusalem for around $280,000-$330,000. Private home prices were hovering around $375,000-$425,000 for five-room properties.

English-speaking buyers from North America and the United Kingdom are flocking to a number of cities and towns that offer a high standard of life for newly married couples and families with children. They include:

•Petach Tikva — This metro Tel Aviv suburb of over 200,000 people is the hottest real estate market in the country, with a myriad of apartment complexes and private home blocks under construction. The Kfar Ganim neighborhood is home to a rapidly growing Anglo community. Petach Tikva’s Kiryat Aryeh commercial zone is home to many high-tech companies including the Israeli branch of IBM.

•Rehovot — One of the fastest-growing cities in the Coastal Plain region near Tel Aviv. Rehovot’s legendary Weizmann Institute has helped create a mushrooming biotech and med-tech industry in the heart of the city, which is attracting growing numbers of English-speaking professionals from around the world. At the current time there are at least six different large-scale building projects under construction to accommodate the influx of middle- and upper-middle-class families.

•Modiin — According to government statistics, this relatively new city (14 years old) is already leading the nation in terms of educational standards and cultural activities. An influx of over 3,000 Anglos from North America, the UK and South Africa during the past decade has made it one of the hottest real estate markets in the country.

•Beit Shemesh — Rivals Modiin in terms of the numbers of Anglos who have put down roots in this suburban Jerusalem city in recent years. The Anglos have transformed Beit Shemesh from a sleepy, low-income town into a thriving city, where educational standards are high and commercial opportunities are growing by leaps and bounds. Beit Shemesh also borders some of the most inviting state parks and historical sites in the Coastal Plain region.

•Zichron Yaakov — Located at the entrance to the majestic Mount Carmel region (Northern Israel), with homes that feature spectacular views of the Mediterranean coast below, this town is in the midst of a construction boom that is attracting a substantial Anglo population. The nearby train station in Binyamina can whisk residents to jobs in nearby Haifa in 15 minutes or Tel Aviv within 35 minutes.

•Ra’anana — Boasting one of the largest English-speaking populations in all of Israel, this suburban Tel Aviv city features high-end real estate properties and two successful hi-tech zones. Its lack of available land space has created a lucrative second-hand apartment marketplace.

•Netanya — The coastal Mediterranean city, located less than 25 minutes north of Tel Aviv (by car) has become a magnet for Anglo and French olim, as well as vacation apartment (i.e. part-time) investors.

During the past decade, building companies have erected lavish beachfront towers and apartment complexes in order to meet the demands of Anglo and French buyers. Thus, real estate prices are at the upper end of the marketplace (between $400,000-$500,000 for a three-room seaside apartment).

•Jerusalem — While there are many new luxury apartments for sale throughout the city, the “Bloomberg of Jerusalem,” high-tech businessman cum Mayor Nir Barkat, is offering incentives to construction companies who wish to build middle-income apartment complexes throughout the Western half of the city. Anglos are employed in the large local hospitals (Shaare Zedek and Hadassah) and hi-tech zones at opposite ends of the city. However, high rental and purchase prices have forced families to move to Beit Shemesh, Modiin etc.

•Tel Aviv — A magnet for Anglos who love to work and play in the Israeli version of the city that never sleeps. However, apartment prices are the highest in the country. There are several apartment complexes in various stages of development that are being earmarked for young couples that wish to live in the hub of Israel’s cultural Eden.

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