Scarcity of Land, In a Land of Plenty

Sometimes there is a misconception that Israel is some desert country that is only made up of sand dunes and wandering camels. It's not to say that there aren't sand dunes and camels, but let's just say there's much more to the insanely beautiful, and advanced country than just that. After wandering from north to south, through the Golan Heights all the way to Eilat, it's obvious what else the country has to offer. From mountains to green forests, from modern lit up cities to beautiful beaches, from expansive valleys to gorgeous streams and rivers, and so much more. Ok, and yes a vast southern desert with plenty of camels. But what's so crazy is all these different environments exist within one tiny country. And all this diversity has given birth to a very unique real estate market.

There's a very clear sequence of facts that have shaped this market. Because the country is so small, there is very little available land. Because there is very little available land, the government strictly regulates its' use. Because the government strictly regulates its' use, it has historically been difficult to build projects. Because it has been historically difficult to build projects, there has been a shortage of available places to live on the market. Because there has been a shortage of places to live on the market, scarcity has been created. And because scarcity has been created, this has encouraged a fast growing and profitable real estate market. But has it grown too much and are we looking at a turn of the tide?

Finance minister Moshe Kahlon has decided that one of his top priorities is to curb the rising market. He believes it has risen to a point where something must be done, and below are the measures that have been put in place.

Higher Taxes for Investors: For the last two decades, Israel has been a hotspot for foreign investment in real estate. Both for vacation homes and rental properties, the market has seen the impact. Moving forward, there will be higher taxes placed on investors to try and squeeze them out of the market.

Buyers Price Program: Only a certain criteria of people are eligible for this program but if you are, it can be really helpful. There are tens of thousands of discounted homes, sold through a lottery. This, along with the decrease in number of investors in the market, should help encourage new buyers to purchase their first homes.

Discounts to Developers and Contractors: One of the biggest problems is just simply how few homes are available for the plentiful amount of buyers in the market. To help solve this problem, the government is selling land to developers at discounted rates so there will be more projects being infused into the market.

These three initiatives mean one thing: uncertainty... the uncertainty of where exactly the market is at right now, and for sure of where it's headed. There's talk of a bubble and there's talk of a burst. Let's hope that instead, maybe there will just be some deflation or slowing of the rapidly increasing trend. At this point, all we can do is observe the new initiatives influence, and make even more informed decisions when investing.