The ongoing public debate over an Israeli strike in Iran is driving away foreign investors. Recent weeks have seen a freeze in foreign investment in Israel's real estate market due to concerns over the effect of a military operation on Israel's economy.
A study conducted by Man Properties, an affiliate of real estate consultancy giant CBRE, shows a 50% drop in foreign investment in Israeli real estate in early 2012, compared with the previous year.
"There has been a freeze in foreign investment in Israel real estate in recent weeks," Man Properties CEO Jacky Mukmel said.
"The atmosphere is affecting foreigners that are being deterred from investing in Israel," said chairman of Israel's Real Estate Appraisers Association Ohad Dannus.
"It's a natural phenomenon that occurs whenever there is concern over political unrest," said Dr. Rina Degani, CEO of the Geocartography Institute. She estimated the slowdown is temporary and that investments will resume once a strike is ruled out.
Roni Manne, a leading real estate marketer reported of recent cancellations of apartment purchases by foreign investors. "Two weeks ago, a Jewish investor from the US explored the purchase of 5-10 floors of a central Israel office building but eventually decided to back out and invest in Belgium instead."
French investors too seem to be pulling out of the Israeli real estate market. "A Jewish French investor who was planning to enter the shopping mall market has decided to freeze his purchase until the security situation becomes clearer," Manne said.
Mukmel said that while the possible strike in Iran is the main reason investors are freezing transactions, the matter can also be explained by the low real estate return rate, the dollar revaluation, the global economic situation and better business opportunities in Europe.