Why does real estate increase in price when Jews move into a neighborhood?
Israel has ridden out the great recession better than almost any Western country.
The surge is an unexpected side effect of the international financial meltdown, which continues to shrink real estate prices in the United States and other nations. Responding to the crisis in 2009, the Bank of Israel slashed its benchmark interest rate to 0.5%. When mortgage rates followed suit, dipping to 2%, home sales exploded, particularly among investors and foreigners searching for more attractive returns than they could earn on bank deposits.
Rising demand pushed the average home price to about $250,000. 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.
That’s good news for homeowners, who watched property values fall in the 1990s and again during the 2001-03 Palestinian uprising and the 2006 Lebanon war. On average over the last decade, Israeli home prices have risen about 3% a year.
But the recent surge in prices has made life difficult for many Israelis, especially first-time homebuyers.