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Israel Real Estate Report Q2 2011
Business Monitor International, March 2011, Pages: 58
Israel Real Estate Report Q2 2011 - Israel's residential property market has attracted attention due to overheating. In November 2010 the IMF warned that house prices were rising unsustainably, to the extent that they posed a risk to Israel's banking sector. The government is now intervening in the market with initiatives to stimulate the construction of more housing stock in order try and balance supply with demand.
The commercial sector has been much more stable (and has therefore avoided any government intervention). Rental rates have been broadly stable between 2009 and 2010, with some exceptions. The market remains quite optimistic when looking at the next few years.
Supply and demand are reasonably in balance with vacancy rates of less than 20% in office and retail space and barely 10% in industrial property. There are new projects to come on stream but not in sufficient quantity to disturb the broadly balance position of the market.
On the economy, Israel's rate of GDP growth for Q310 was 3.8%. We expect growth to moderate even more through 2011 and 2012. Compared to Q210, every component of GDP by expenditure posted a lower rate of growth, except for government spending. We believe that the anaemic recovery in Western economies bodes poorly for both consumption and exports, which were two key growth drivers throughout 2010. While our end-2010 real GDP growth estimate has been revised upward to 3.7%, our 2011 and 2012 real growth forecasts are 3.0% respectively, due to Israel's muted growth prospects over the medium term.
Politically, Israel is currently in a tense state. The chances of renewed conflict with Hamas and Hizbullah remain high, while public debate over the merits of a pre-emptive strike on Iran's nuclear facilities is growing. While the Israeli government supposedly supports the resumption of peace talks with the Palestinians, the construction of new settlements in occupied Palestinian territory is pushing events in the opposite direction and polarising debate. The current government, dominated by the Likud party and led by Binyamin Netanyahu, comprises a large and often unwieldy coalition of interests, and may not last a full term in its present formation
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