The Israeli housing bubble is an observation that Israeli real estate prices in the late 2000s and 2010 appear to be inflated (when compared to the long-term average, when compared to many other developed economies, when compared to rents and when compared to average income), and that this may constitute a real estate bubble. On the other hand, it is widely viewed to be caused by a general housing shortage,[1][2] and many economists and investors in Israel do not believe that there is a bubble.[3]
In response to the global economic recession in 2008, Israel's central bank governor, Stanley Fischer, lowered interest rates to an all-time low of 0.5%. That resulted in prices rising very fast in 2009, after rising steadily in the last decade.[4]
Most mortgages in Israel that were taken in the years 2007–2009 were adjustable-rate mortgages that are pegged to the prime rate which at the low was 1.75%.[5] Many economists claim that the rise in price is an economic bubble and that once interest rates pick up the housing market will crash.[6]
Some also blame Stanley Fisher for repeating Alan Greenspan's mistakes during the year preceding the housing bubble in the United States,[7][8]