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Is Israel Heading Toward A Housing Bubble?

Israel could be headed toward a housing bubble soon, warned an executive with the Organization for Economic Cooperation and Development.

Peter Jarrett, the head of an OECD division that oversees 10 of the 34 member states including Israel, issued the warning, with plenty of caveats, in an interview with Globes, Israel’s economics magazine.

Israel is one of the top five countries in the OECD at risk of a housing bubble, said Jarrett. But “it’s not necessarily unavoidable,” he said.

The cause of Israel’s potential crisis has to do with the fact that the country was slow to build housing in the first decade of the 21st century, leading to a rise in prices. Israel has tried to deter speculators from further driving up demand, all while attempting to increase the supply of housing, Jarrett said. But it remains to be seen whether these actions will work to deflate the bubble.

The high price in housing was one of the issues that brought hundreds of thousands of protesters into the Israeli streets in summer 2011 in what are referred to as the Israeli social justice protests. Afterward, Prime Minister Benjamin Netanyahu promised to build inexpensive housing for young people.

Contact Naomi Zeveloff at zeveloff@forward.com or on Twitter @naomizeveloff

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