The last decade was a good decade for the investing public, and there were nice increases in a variety of investment areas, both in the capital market and in real estate, but some people made more money - were they the investors who put their money in the stock market or those who engaged in real estate transactions? The answer is in front of you.
Just before the last decade began, an event occurred that shook the real estate market and affected the entire global economy – the subprime crisis of 2008, which led to the bankruptcy of major banks in the US, the collapse of the American capital market, and a freeze on extensive construction in the real estate market. In those difficult moments, the future seemed shrouded in fog and it was difficult to predict where the global crisis would lead the world of finance in the next decade.
For investors, it was a period of a crisis of confidence in the financial system, and at the beginning of a new decade, the investing public pondered the question of what the right and safest investment avenue was. If they had the opportunity to jump into the future to 2020, they would realize that they would be better off investing their best money in the real estate market, and we will soon see why.
When looking at the capital market indices in Israel, it seems that overall, the last decade has seen nice increases. The TA-125 index, which includes the stocks included in the TA-35 index and the TA-90 index, recorded an increase of approximately 42%, and the general bond index, which includes government and corporate bonds, recorded an increase of 53%.
However, it should be remembered that in the last decade, several of Israel's leading companies suffered a severe blow that affected shareholders, such as Teva's decline of more than 80%, ICL, whose stock fell by 46%, and even Bezeq, which started the decade on the rise but ultimately also fell.
Meanwhile, the real estate market after the global crisis has actually shown an awakening in the last decade. Some believed that the social protest in 2011 would lead to a decline in housing prices, and indeed, in the first year after the protest, a slight slowdown in price increases was observed, but very quickly the rate of price increases increased and the hope of the protesting youth for a decline in housing prices faded.
The slowdown in construction starts observed after the subprime crisis ultimately led to higher demand in the real estate world and an increase in prices in the entire market. If we compare the TA-125 and the general bond index to the housing price index in the same period, it seems that the numbers are much more impressive. According to data from the Central Bureau of Statistics, the housing price index increased from January 2010 to September 2019 by approximately 69%.
Some cities in Israel showed more impressive increases and some cities less so. A study conducted by the Yad 2 website examined price changes in 4-room apartments in Israel since 2011 and found that housing prices in Lod increased by about 80% in the past decade, compared to 57% in Tel Aviv and about 35% in the Sharon cities of Kfar Saba and Herzliya. The rent index also rose by 23% in the past decade, so those who purchased an apartment at the beginning of the decade and rented it out earned an increasing return over the years.
When looking at real estate stocks, it seems that impressive increases were recorded there as well. The Tel Aviv Real Estate Index, which includes stocks included in the real estate and construction sector, recorded a respectable increase of 156% during that period, and the companies that closed the decade with the largest increases in the Tel Aviv-125 index were real estate companies, including Airport City, Amot, Aloni Hetz and Melisron.
The years that began with great uncertainty in the real estate market later turned out to be good years for anyone who chose to invest their money in real estate. Ultimately, it should be remembered that investing in real estate is a solid and profitable investment compared to the high volatility in the volatile stock market, and it seems that the real estate market will continue to be an attractive investment option in the coming years.
