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A Small Country;
Vast Opportunities
Israel is a small country, smaller than Lake Michigan, and nevertheless it offers many
challenges and opportunities in the field of real estate. With 60% of the land actual
desert, there is, on the one hand, a limited amount of vacant space for building, but on
the other hand, the country’s population is over 8.5 million people, and continues to
grow by 1.6% each year, requiring more accommodation and offices, and more hotel
accommodation to deal with the rise in tourism.
As all small and developed countries, Israel faces a growth in annual demand in both
the residential and commercial markets in line with its population growth. However,
the current supply of available real estate spaces for construction is shrinking - which
from a macroeconomic perspective, is causing prices to increase steadily.
Over the years, there have been times when the state of Israel has absorbed a massive
increase of new citizens. For example, immediately after the collapse of the Soviet
Union in 1991, there was an immediate need for massive building of apartments which
were designed to deliver a faster and cheaper housing solution for the new arrivals.
However, the Government has introduced and invested in new programs in the real
estate sector as a direct result of the continued population growth, rise in living
standards and increased quality of construction. Furthermore, many of these old
buildings were not strong enough to withstand big earthquakes, to which the region
can be prone. Consequently, in return for strengthening these old buildings, or
demolishing and rebuilding them, real estate entrepreneurs receive building rights to
add additional floors to the existing building, which are used to build new apartments
and also gain more profits for the entrepreneurs. This insight comes from handling real
estate and urban renewal transactions for more than 22,000 housing units, at various
stages of construction and marketing. We believe there to be approximately 40,000
housing units marketed annually in Israel.
Despite the many options proposed by the Government, the increase in demand
for real estate in Israel is still much higher than the rise in current supply. As of
today, there is an estimated shortage of about 150,000 units, and with that, for
example, between 2007 and 2014, residential property prices in Israel rose by
more than 100%.