The Impact of War on Israel’s Real Estate Market: A Delicate Balance of Factors

The war’s immediate impact has been felt in several areas:

• Reduced Demand: With hundreds of thousands of people being called up for military service, the desire to make major financial decisions, such as purchasing a home, has understandably diminished.
• Infrastructure Disruptions: The ongoing attacks from Gaza have caused significant damage to infrastructure, particularly in the south, hindering construction activities and disrupting supply chains.
• Labor Shortages: The reliance on foreign workers and laborers from the Occupied Territories has been severely disrupted due to the conflict, leading to labor shortages in the construction sector.
• Economic Uncertainty: The prolonged period of fighting has created an environment of economic uncertainty, making individuals hesitant to invest in large purchases like real estate.

Despite the current challenges, history suggests that Israel’s real estate market has a remarkable ability to rebound following periods of conflict (based on 6 wars Israel experienced from 1967 to 2006). In the past, housing prices have typically experienced a surge within a year or two after the cessation of hostilities.

This resilience can be attributed to several factors:

• Increased Demand: The return of demobilized soldiers and potential immigrants fleeing rising anti-Semitism abroad can lead to an increase in demand for housing.
• Government Intervention: The Israeli government has a history of intervening to support the real estate market during times of crisis, often through subsidies and tax breaks.
• Investment Attraction: Israel’s strong economic fundamentals and its status as a tech hub continue to attract foreign investment, including in the real estate sector.

The decision of whether to buy an apartment now or wait depends on various factors, including individual financial circumstances, risk tolerance, and expectations for the future of the market.

• For those with stable finances and a long-term perspective, buying during a period of the downturn can potentially lead to future gains especially when we consider the aftermath of previous conflicts.
• For those with limited financial flexibility or a shorter-term horizon, it may be prudent to wait until the market stabilizes and interest rates settle.
• We would not advise individuals who need to take more than a 30% mortgage to buy a home at this time when mortgage interest rates can reach higher than 7%.