I am, without a doubt, a skeptical real estate person. I also know what a bad real estate investment can do to you; unlike stocks bound crypto gold, ect this investment can cost you more than you put in with mortgage and tax payments not stopping, I am in that position aldo the US market is red HOT my property in Syracuse can’t be sold for the same price I got it four years ago the reason is a simple wrong neighborhood where you need to deal with tenants in a state were getting them out is impossible. The damage they are doing to the apartment is more than the rent they paid in rent.
In Israel, for a long time, I believed that housing is unaffordable compared to wages, let alone did I know that one decision by Stanley Fischer would change that for good! 0% interest rate in 2011 there was a massive protest of hundreds of thousands in Israel saying life is too expensive and housing was the number one issue from then we rose 100%.
In some cities even more, nowadays I don’t hear that claim when I’m visiting Israel any more of that? Straightforward Israelis changed their mindset. A house is not a way to save your capital in 4 walls. It’s an investment that benefited all the people who had some real estate enjoyed it the most, but young people got cheap loans and mortgages. I know what you are thinking, SUBPRIME. Well, no, you need to come with a 25% cash minimum, so no 105% mortgages people need to get the money and show how they earned it.
In covid time production of new houses declined by 50% making the market smaller add to the fact that it takes around 13 years from starting a new project till the end, and the fact that Israel is the number one growing OECD country in the world and you have a shortage of supply and a big one.
But wait, housing during covid rose “only” around 7.5% while the US rose around 15%-20%, So the US is still a better place to put your money? Well, not precisely the endless printing of dollars by the fed will not stop, nor will there be a brave enough politician in Washington that will contain the printing and start scaling down on social programs and budget-cutting so the US could pay the INTEREST on its debt they will try to print there way out which I believe the 5.2% inflation (which in 80s inflation reads is 13.2%!) will just rise.
The dollar will lose more of its value. Some like Citibank see up to 20%! I would go with a less harsh approach since the entire world is printing at the same time, yet Israel currency stays stronger than ever with Israel not experiencing the same inflation and no printing of shekels made in proportion to the rest of the world, the US lost around 15% of its purchasing power as this is written the US is 3.21 shekels I believe we will see it drop under 3 shekels in 2022 which brings me to the point the rent return is low around 3% like NYC but even if you get only 7.5% and add to that the fact that you “earned” An extra 15% on the dollar devaluation well you made 22.5% on your dollar and if your like me and think the printing has just started well it becomes hard to bet on the US market to keep up with inflation as Israeli assets will.
Disclaimer:
This is not a recommendation. I own Israel real estate, but I am not a financial consultant.
