Friday afternoon, February 2014, warm pleasant weather brings around 4,000 people to the apartment fair. Couples with and without kids come to the fair and leave loaded with catalogs in a hard bag given to them from one of the presenting companies. Wondering smiling faces enter the fair only to leave an hour later looking downtrodden, asking themselves why they wasted 25 Shekels on parking.
Many people visited the fair. That is certain, but were deals closed? I think not, and my vision is generally 20/20.
The young couples are in no hurry to close a deal, still disappointed from the cost of owning an apartments, unbelieving that prices still haven’t yet reached the wave of corrections and price drops that the public yearns for and has been demanding since the summer protests of 2011. Yes, the very one that started on Rostchild Blvd. The same boulevard where 3 bedroom apartments are being built for 3.7 million shekels.
Unlike the fairs of previous years, this time young couples are willing to settle for fewer rooms and to buy a smaller apartment, provided that they don’t have to become slaves to a massive mortgage. It is easy to overlook the fact that every mortgaged Shekel means repayment of 2 Shekels. Ask your banker how much money you would have to return on a 700,000 Shekel mortgage. You would payback around 1,400,000 Shekels over 20 years. The mortgage table is unforgiving.
There were almost no small apartments on offer at the fair. The people to ask why are the municipalities. If municipalities require that building plans incorporate small apartments, then that is what contractors will build. That’s not the case today.
It seems that construction companies have realized something this year. Some companies gave discounts, others offered payment plans, and some even offered a break on interest and inflation adjustment for a year or two. All of this wasn’t on offer at previous fairs, but the public has matured and wizened. All of that is not enough. The public is waiting for Mr. Netanyahu’s promise to lower home prices by 30%. Where has he been since 2007, when the price hikes began? It seems that he was in the same spot with a slight difference, back then it was after the elections and this time he is promising before the election, maybe to keep his favorite seat that has appreciated 65% since (the real estate appreciation since 2007). For the past 4 months the real estate industry has been frozen. The industry isn’t as energized as it once was, demand is down, while supply has gone up but not in significant numbers. Supply will come in a big way soon.
The media aren’t talking about it, but luxury home prices are in decline, buyers are less willing to pay, but sellers are obstinate. To me, it seems that buyers are stronger than ever and are ready to flex their muscles.
The concerns brought forth by the Bank of Israel and other sources in the real estate industry, regarding the renewed appreciation trend, were recently confirmed by the home price index published by the Central Bureau of Statistics. The index shows prices in December were 1% higher than November and 6% higher than December 2011.
Unlike most parts of Israel, big city Tel Aviv registered a big surprise with prices dropping a quarterly 12% and annual 15% to 3,130,000 Shekels. The explanation for the large price drop is that there is a trend in Tel Aviv to invest in less expensive areas – in East and South Tel Aviv.
Is Tel Aviv is the forbearer of things to come, with prices dropping nationally, only time will tell? It seems like prices are on the way to the coveted 15% for the 2014 calendar year.
If you are looking to buy real estate in israel offered through brokers, it is recommended to contact us.
Written by Yossi Mimran, marketing and advertising master and owner of Yokra Estate, specialists in marketing and brokerage of luxury homes in Israel. Most of our assets are in the 3 million to 40 million ILS range.
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