Almost all of the land in Israel is owned by the central government. People buy 100-year leases and the like.
Until the last ten years, Israel had a strongly socialist economy. Now it is an envy of the world.
Meanwhile, some economists warn that Israel’s housing bubble is heading for a bust. If interest rates rise again, payments on adjustable-rate loans, which make up about two-thirds of the total mortgage market activity, will increase, potentially leading to defaults.
“People paying 3,000 shekels [about $800] today could soon find themselves paying 5,000 shekels [$1333], and it’s going to be a big problem,” said Ayelet Nir, chief economist at IBI Ltd., an Israeli investment broker.
Although foreclosures historically have not been a problem in Israel, where down payments average 30% to 40%, much of the recent activity has been fueled by investors and speculators, accounting for as much as half of the recent apartment sales in Tel Aviv.
A quick fix would be to continue raising interest rates, but the Bank of Israel is under pressure to prevent them from deviating too much from U.S. rates. The growing gap has strengthened Israel’s currency against the dollar and made its exports — which account for half of the country’s GDP — more expensive abroad.