The unprecedented surge in the value of real estate properties in Israel, which jumped by only 16% last year, is a by-product of economic conditions that supported real estate investment, but mainly a symptom of a housing market suffering from a consistent and deep housing supply deficit. Demographics of a consistent and accelerated increase in the population, when it contributes its share to the intensifying demand side, while on the other hand, the supply side suffers from a shuffling pace of construction starts that fails to catch up with the demand gap.
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Well, for those who are hoping for a rise in interest rates that will lead to a turning point and create a new balance of power in the market, here is one example that may signal that this is not necessarily the case. According to all estimates, inflation may accompany us for a long time to come and, as is well known, there is a strong correlation between inflation and rising rents. In fact, the vast majority of potential home buyers, who are currently living in rent, are likely to meet inflation even in the form of a sharp rise in rents.