Market Trends of Israel Commercial Real Estate Industry
This section covers the major market trends shaping the Israel Commercial Real Estate Market according to our research experts:
Shortage of Building Land and Labor Availability
- The current major problems of the industry are shortage of building land, the shortage of labor, and the regulatory regime under which the industry operates. However, the problem regarding shortage of land has somewhat abated.
- Most of the land marketed by the Israel Land Authority is for target price projects. The Finance Ministry now allows entrepreneurs who have won the land tenders to use 60% of the land for target price projects (that is for young couples or for families who do not own a home).
- The remaining 40% of the land can be used to build houses for the general public. This has greatly improved the problem of land scarcity in the country. The next big problem is the shortage of construction workers. That is one of the major reasons for the rise in the production costs, which has risen greatly in the past five years.
- This problem will be alleviated by the agreement with China, which will bring in Chinese construction workers. Although the Palestinian construction workers are very well trained, there is a problem with their work timings, despite their excellent work.
- The shortage of land and workers poses a problem for the developers and the government alike. In order to solve the problem of housing shortage and rising prices, they must make land available and make sure that there is sufficient work force for the current needs.
- The current accumulated shortage of housing is 149,000. Since 2000, housing starts have usually been less than the annual creation of households.
- Construction of nearly 58,000 houses was completed in 2016 and during the past five years, the annual average numbered to 54,000 houses. In 2016, housing starts were 53,300. The average annual housing starts during the past five years was 48,840.
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Property Investment in Israel is Evolving to Offer Ample and Flexible Opportunities
- Investing in various types of commercial properties and/or private residential projects is a practice, which is emerging as an increasingly viable alternative. The market is evolving to broaden its offering and cater to the foreign investors’ needs.
- Financial experts, global asset managers, and government representatives say the property market is a solid and attractive alternative to others.
- This is mainly due to the fact that despite the mounting anticipation of a drop in Israeli real estate prices, property prices remain impervious and continue to rise year over year.
- This is further compounded by the fact that, in the face of indications that Israel's economy is slowing down, the slower 3.2% growth rate expected this year, is still a faster pace than most economies in the United States or Europe.
- Looking beyond the financial aspects of this type of transaction, there are many emotional aspects that are driving foreign investments in real estate in Israel, namely Zionism and the rising anti-Semitism in the world.
