Who Buys Apartments in Israel?

The Israeli real estate market is an attractive investment. It's been that way for at least a decade, some say even longer. Foreign individual investment is so prominent, it's been blamed for the shortage of rental apartments in Jerusalem, the high price of apartments in Natanya, and the shortage of low cost apartments all over Israel. Putting blame aside, let's look at who buys apartments in Israel and what it means to their owners. From a quick, unofficial (personal) survey, I see foreign apartments buyers in these categories:

• High income individuals interested in Israel
• Zionist and Jews (a few Christians) which travel often and support Israel
• Jews in areas of stress interested in immigrating to Israel (French recently)
• Individuals familiar with Israel and with international investment aptitude

In addition, there are groups, usually Jews (or Zionists) and sometimes Christian pilgrims, which own apartments to use by group members. These are not rented out, but are used by individuals on a temporary basis.

I sometimes here people ask if it makes sense to invest in Israeli apartments if you do not have strong interest in the country or the culture or even the religion. The answer is as always “it depends”. There are small and medium investment groups which have invested in Israeli Real Estate as a hedge against market downturn in other locations (i.e. US and Europe). There are real-estate investors which invest in both residential and commercial properties. These are usually international companies which spread their investments in many locations. In general, there are not many individual investors which are familiar with the Israeli Real Estate market. Since investment in one property is something that needs to be done with knowledge. Usually, individuals coming from a foreign country do not have either the knowledge or the contacts with knowledge to make informed decisions. I do hear of buildings, both in Jerusalem and in Tel Aviv which are owned by foreigners and are usually managed locally. For the most part, in the city center locations, these are older properties which have been owned for a long time and return steady income.

The strangest fact from international Real Estate investment in Israel is who is making the profit. While in most other places the religious are not always the savvy investor, in Israel it turned out just so. If you invested in Jerusalem properties twenty years ago, your investment would probably beat almost any other major city around the world. The same can be said about Tel Aviv, which attract less religious, yet more idealistic and not necessarily following traditional Zionist beliefs. There is also a small amount of Christian investment in the north of Israel. Christian pilgrims spend most of their time in the Galilee, and groups associated with movement or individual churches have guest homes used by their member. Recently some individuals and groups (seems like many from Asia) have been investing both in residential and commercial properties.

Obviously there are many questions about investment in Israel Real Estate. There are many ways of approaching these kind of transactions. I will attempt to explain some of the basics of Israeli Real Estate and cover some general market trends.  

To be continued ....