Investment: On fertile ground

Agricultural land is a growing market in Israel, with housing in high demand and sites in short supply

December 13, 2010

A new trend has swept Israel off her feet - trading in agricultural lands. Entrepreneurs and private investors are eagerly seeking and buying lands for investment. But why are agricultural lands so sought-after?

Many people are unaware of the fact that 93 per cent of all lands in Israel are owned by the government's Israeli Lands Administration. That leaves only seven per cent of lands that are private and therefore tradeable, of which the most profitable part is a 1.5 per cent strip of prime land in the centre of the country.

As a consequence of the flourishing property market and the high increase in housing prices, this has created a predicament. According to Nechama Bugin, a real estate appraiser, "as of today there is a shortage in available lands for construction in the centre of Israel and the periphery and that is why it is most likely that agricultural lands will constitute a solution for enrichment of the real-estate market in available soil." Most reliable forecasts predict an ongoing increase in real-estate prices, providing rare opportunities to purchase agricultural lands at attractive prices. As a result of these market forces, the purpose of many agricultural lands has been changed to development and construction.

Many parents are now purchasing land as a wedding present, knowing that within just a few years the purchase it may well have doubled or tripled in value and perhaps even more when designated for construction. Shlomi Tahori, CEO and founder of Shlomi Tahori Investments, a leading real estate company in Israel, advises that, when looking to make a smart investment, the agricultural lands are a great idea. Consideration should be made of the LOP principle: "location, ownership, and potential''. The lands in the centre of the country have the best prospects for high earnings. Get as close to a residential area as possible, as this will be adjacent to the area designated for future residential construction. Purchase the land from a private owner and not the government, so that once you buy the land it will remain private and will not be iable to revert to the government, whatever the administration. And as far as potential is concerned - the probability of making strong returns should be considered from a preliminary study to ascertain high potential in the land.

Crucially, the investor can always make a disposal of his property. In conclusion, explains Mr Tahori, the quantity of "smart investment" lands is running out. For some, the land of milk and honey can become a pot of gold.

Last updated: 11:52am, December 13 2010