Housing market in Israel

The average house price in Israel rose by a mere 0.23% to end-Q1 2008 from a year earlier, as a result of political uncertainties and the global financial crisis. The average price actually fell 3.4% over the same period when adjusted for inflation, according to the Central Bureau of Statistics.

However, these national figures conceal wide variations. House prices in Tel Aviv rose 11% during this period. In Jerusalem prices rose by 11.2% to Q1 2008 from a year earlier. However, house prices in the Haifa District fell by 10.5%, and in Southern District by 7.6% over the same period.

Israel's real estate market is volatile, and often reflects the current stage of the unending Arab-Israeli conflict. In early 2008, there was a surge of new housing projects in the occupied territories especially in East Jerusalem and the West Bank, worsening the conflict between Palestinians and Israelis.

There are no restrictions on house purchases and private land ownership in Israel. However, only 6.5% of the land is privately-owned. The remaining 93.5% of the land is state-owned which is only available for leasing.

Apartments in Tel Aviv have yields from 4.23% to 5.13%. Down 2.3% from the previous year, rental yields are now at an average of 4.7%. Yields are highest for 120-square metre apartments, with a monthly rent of around US$21.73 per sq. m. Apartment prices average around US$5,700 per sq. m. Properties of 90 sq. m have the lowest yields and prices, selling at an estimate of US$5,086 per sq. m.

Roundtrip transaction costs, i.e., the costs of buying and selling a property, are around 6.3% to 10.8% of the total property price. The buyer shoulders most costs. Buyers must check what is included in the purchase price because property in Israel is sold with just the bare walls, unless otherwise agreed. Buyers must also check first if the land is zoned for building, not for agriculture.

The historic region of Palestine was the focus of immigration by Jews in the late 19th century, as a result of the nationalist movement known as Zionism. This immigration intensified in the 1930s when the Nazi holocaust began.

In 1947, the UN partitioned the region into two states, with 45% of the land controlled by the Palestinian Arabs and the remaining 55% by the Israeli Jews. This partition was not accepted by the Palestinians. They lost the ensuing war, and large numbers of Palestinians were driven from their homes The Israelis ended up with the lion's share of the cultivable land, and control over water resources.

The Arab-Israeli conflict has led to several wars including the Intifadas (1987 and 2000) and the Lebanon wars (1982 and 2006). The recent war between Israel and Lebanon-based Hezbollah ended in August 2006 with a UN resolution declaring an immediate ceasefire. However, peace is not assured due to continuous conflict between the Palestinians and the Jews.

Despite prolonged political struggles and security threats, Israel's economy still managed to grow rapidly. The country has capitalized on its highly skilled and educated workforce, on enormous financial aids from the US, and investments from wealthy Jews abroad.
The country's economy is technologically advanced. The telecommunications, semiconductor, and software industries symbolize Israel's dominance in information technology.

The country's GDP growth has been stable for the past years. In 2007, the economy grew 5.3% and GDP per capita increased by 3% to ILS92,248 (US$26,519) from a year earlier. The GDP is expected to grow by 4.2% this year despite the global financial crisis.