Despite the high hopes of all supporters of the Rothschild Social protests in 2011, and the real action taken by the Bank of Israel and Finance Ministry to cool down property prices, after a brief holding period prices are again on the rise, even if on a more gentle curve then the years preceding the protests.   
While this is particularly the case in the central area of Israel, it is a basic truth for the whole country. Whereas there is still a difference in pricing between the central and peripheral areas, factors such as rail infrastructures, government and educational decentralization, are increasingly leveling the real estate playing field. As such if there is a  pricing surge in Tel Aviv, the chances are that there will also be a (more gentle) surge in places such as Ofakim and Hadera. 

The question that naturally emerges is till when will we experience such upward movement in property pricing in Israel? My advice is don’t bet against prices going down in the short to middle term. Even wars seem to have resulted in property price increases. Following an initial “flat” period after our wars, market confidence soon seeps back into the market. We experienced this after the Second Lebanon War in 2006. After many years as a sleepy town, it took scud missiles landing in Haifa to lift it out of its real estate slumber. Two years following the war, property prices in the downtown area were up to 40% higher then before the war. More or less the same pattern repeated itself in Beersheba after Operation Cast Lead in 2008-2009. 

The real factor has been and will seemingly continue to be the constant supply and demand tension. Israel has more young families entering the real estate market, per capita, then any other developed nation (estimated at 40,000 across all sectors) . Israel also experiences an inflow of thousands of immigrants every year. In addition, over the last 2 or 3 decades there has been strong buying activity by non-resident Jews. Such buying patterns will only increase as Jewish life becomes more uncomfortable and threatened in large areas of Europe.

In terms of supply there is an annual lag or shortage of 10,000 apartments. Naturally this accumulates, and the gap is somewhere between 60,000 to 100,000 apartments at any one time. The true irony of Rothschild is that it only contributed to this shortage of housing. In the heady days and months following the social protests buyers were expectant of property prices dramatically falling. As such, buyers across the board held back from making property purchases. This led directly to fewer new building starts in 2012. According to data released by the Central Bureau of Statistics there was a 13% decline in newer building starts in 2012. The already lagging supply situation just got tighter. 

A dead end? Yes and No. This writers humble opinion is that the real estate pricing relief promised by the new political game makers will be mixed. Plans call for the more speedy and efficient release of sate lands by the Israel Land Administration to the private sector for development. This will certainly impact on prices in the peripheral areas. As for the residents of central areas, the coastal areas and Jerusalem, where there is not much more land to release, there should be a measure of relief that property prices are not quite that of Singapore, Hong Kong or Japan.