Is the Market Waking up?

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For months I have been posting about the slowdown in the real estate market in Israel countrywide. It started last spring when austerity measures of 40% down payments were instituted along with tent city protests against the high cost of housing. Although many already on the housing ladder had the funds to ‘buy up’ the fear that prices might come down more put a temporary paralysis in the market.  The saying was “only sellers that have to sell are selling and for 10% less than 2010”.

It isnt just that its summer, although that is a traditional real estate cycle of high activity in the later months of spring and summer. There seems to be a perception that waiting is now NOT the thing to do.  Haaretz today published an article subtitled, It’s time to stop sitting on the fence: Housing prices aren’t going to drop much, if at all.

In my personal real estate business and circle I am always asking other active agents how they are seeing trends in the market.  Just this week facing two situations of multiple offers on the same property, I asked one of the other agents “What gives?” Her explanation was one I expected since two of the parties involved were French, those with Euro are afraid, the French are afraid of high taxation from the new PM Hollande and anti-semitism rising.  Other Europeans  are afraid of their currency value dwindling in paper assets and are ready to invest in a real estate market that has remained traditionally strong, Israel.

For Americans, the dollar is reaching excellent heights with many expecting it is a short-lived rise due to the nearly universal acknowledgment that inflation and devaluation isinevitably coming, especially if the present tax and spend administration there regains the White House.

For Israelis its summer, yes, but there is also the perception that prices did come down, sellers who couldn’t sell are lowering or have lowered and when they do that may be as good as its going to get due to the influx again of foreign money.

” New Spirit” partners with Builders for secular housing in Jerusalem

Young Jerusalem residents founded a group called “New Spirit” with a goal of reclaiming the identity of Jerusalem as a multi-identity city to help tip the balance of the city’s cultural personality.  Their goal is to attract young families to build their lives in Jerusalem who are secular and to resist what is known as the “haredization” of the city’s neighborhoods.

In partnership with builders, “new Spirit” has claimed 30 apartments in the New Talpiot development on Beit Lehem Road to be sold at a 15% discount.  Buyers need to meet a number of criteria: that at least one of the couple is under age 41; that the partners work at least a combined 125% job; and at least one partner is a college graduate. Guidelines can be altered and will be judged on an individual basis.

Prices will compete very closely with new construction the relatively new but religiously mixed community of Har Homa. A three-bedroom apartment (105 square meters) starts at NIS 1.475 million ($390,000); and a 121-square meter four-bedroom apartment starts at NIS 1.685 million ($440,000). Prices for existing homes in Har Homa are slightly lower.

The contractors are Balilus Group, M. Aviv, and the Rosenzweig and Baruch families, state the idea is based from a social outlook to a sector they perceive as desirable purchasers.  THey voice concern over the high and prohibitive cost of buying in Jerusalem for two-income young families.

The action group with the builders  hopes that their actions however small will influence perceptions to provoke a shift in the Jerusalem population and the appeal of the city. THis is their third housing group purchase.

Elisheva Mazia, director-general of New Spirit, stated,  “Each time, it’s exciting to see how we open the door for young couples to buy an apartment in Jerusalem at a discount and make a life in the city.”

Prepare for a new wave of French buyers

The recent crisis in the European econmoy that has sent Euro holders reeling has brought a rise in interest in local property purchase.  In France a recent Israeli apartment expo brought a record attendance of more than 5000. Reasons for the record attendance not only reflect fears of a failing euro and lost values there, but rising anit-semitism after the recent shootings in a French day school.

Many fairgoers are young couples looking to make aliyah and seeking upscale areas where they can attain a similar standad to France, such as Hadera and other coastal cities less expensive than Tel Aviv.  Older attendees looked at Netanya and Jerusalem to be closer to their religious communities and friends already living here.

The intifada years of 2000-2004 were not only marked by recession, unemployment and business losses, but a significant drop in the real estate market.  In the years following, 2005-2010 as the country entered into greater stability due to increased intelligence and security measures, the property market entered the boom that doubled values almost overnight for those who did buy in the earlier half  of the decade.

During the intifada many agents exagerrated the role of the French buyer who enjoyed strong property value in France and saw local real estate as a bargain.  There came a significant influx of French buyers into the local property market. French fears of future anti-semitism caused buyers to invest in a pied-a-terre here that would be an investment of assurance.

Many of the French property owners did not make aliyah, however, but became landlords or simply came to visit leaving their apartments here empty. In the ensuing years a percentage saw that France seemd economically more opportune along with rise in their Israel property values so some even sold their holdings here for profit.

The results of this recent fair attendance and poling there showed that there is a shift in attitude with buyers looking more seriously at making Israel their home.

Greece’ last week’s run on banks. Where do they move money?

In the past week the country of Greece now in a Euro crises has seen over 890 million Euro withdrawn from its banks by depositors in the last week.  While the recent rash of withdrawals sent a tremor through other countries expeiriencing similar failures economically, Greek depositors have actually been systematically moving their assets out of their banks for nearly two years.

Where are Greeks moving the money to?  First most popular is into German, British or related Banks seen as stable such as HSBC. Another form of popular investment is in stable property markets nearby, such as Berlin, in tangible commodities such as precious metals.

Although Israel may be experiencing a market correction of late that has seen property value dip and the market slow, investors who see Israel as a safe haven may push prices back up as British and French place their Euro holdings in property in Israel. This makes a difficult reality for local people hoping to move up the property ladder reasonably, but will continue to the market moving here.

Opportunity for US$ Property Buyers in Israel

The tremors of the Euro and in the US stock market have helped shore up the dollar here against the shekel.  At a current rep rate of 3.82 NIS those who were in the property market last year with assets in US currency who forestalled buying now find themselves in the best of positions.  Many sellers who bought new apartments from builders in the last year or two that put their selling on hold not wanting to move temporarily to rent while awaiting their new apartment now find their present apartments worth 10-15% less value due to a slight glut in the existing second-hand market.

Haaretz published an extensive article on the current conflict in the Israeli property market; that sellers are reluctant to lower their prices but the reality for those who must sell is “accept a lower price gratefully”.

This is seen by many property agents as a market correction, with government assistance after the stellar rise in values over 2005-2010 that brought prices too high.

This agent has worked significantly in the Maale Adumim market where many young families took the periphery location as a compromise to get more apartment for their money in hopes of mobility in the next few years. This agent’s experience has proved that many units that have been priced at a current popular asking value are sitting unsold months later.  I recently noted a very improved newer apartment in an excellent building in that locale with an attractive asking price compared to the competition.  I called the seller who already had an offer in a few weeks. They priced themselves about 11% lower than competing properties and sold in weeks.

The number of those under the pressure in the periphery who bought new units on paper are now facing the crunch; ask a realistic and modified price based on current values or sit until forced to move.

If I had a pulpit in the United States I would push the message “Buy now while your dollars are still high!”  With current US fiscal policy the strength of US dollar is most likely a very temporary situation.  For those who dream of a pied-a-terre in ISrael, now is the time to take the plunge!

What’s selling? What isn’t.

This week Israel’s business publication, Globes posted their recent sales column which confirmed the “word on the street” among real estate agents and business lawyers, that 2nd hand property inventory is high and what’s selling is the lower price market, but mainly in strong areas, not periphery.

It’s this author’s experience that while in 2010 sellers were getting close to asking. Now that asking prices are not changing, actual sales closings are about 10-15% lower in the mid-range market.

The real estate truth that the high-end and luxury market slows down first is evident here, with higher priced homes at and over the 2,500,000 NIS mark are not moving in either Jerusalem or Tel Aviv where inventory in these price ranges is the largest in the country. Closing prices cited in the Jerusalem area are mainly in the Rehavia area at a surprising 1,500,000-1,700,000. Rehavia traditionally a safe investment.

Tel Aviv agents also remarked at a slowdown with properties in the ‘golden corridor’ of Ayalon to seacoast, from Rothschild to the Yarkon River had lost about 10-15% of value compared to spring 2 years ago.

 

 

 

Tel Aviv too High Priced?

Harel Financial Services and Investment firm made the statement this week that Tel Aviv apartment costs are 45% too high.  Tel Aviv is now ranking 11th in the list ofcities with the most expensive real estate.  London tops the list at a cost of approximately $17,000 per square meter.  Tel aviv average cost per square meter is $7,700.

Harel’s reasoning for its feeling that Tel Aviv real estate is over-inflated is part of the greater picture of real estate in Israel, citing government owned land as a majority ownership, the high costs of building and infrastructure that is substandard to European, American and Asian competitors that are in the top 50.

Israel now World’s 3rd Hottest Real Estate Market

According to an independent survey published by Yediot Aharanot, one of the top three news outlets in the country, Israel is the third hottest real estate market in the world with China and Hong Kong as #1 and #2 respectively.

Although 2011 showed a decline in housing prices and closed transactions, a decline in interest rates recently offered by Israeli banks is seeing a resurgence of buyer interest.

Restrictive measures such as the requirement of 40% down payments have still not been lifted, and this author observes there is still a softening of prices from the peak years of 2009-10, but market interest and activity has increased as sellers compromise on prices.

Has the Bubble Fizzled but not Popped?

According to the MInister of housing prices of housing have dropped countrywide.  New construction is down 11% existing housing by 6%.  His theory is that there is a current surplus of housing on the market.

This writer’s theory is that the austerity measures taken by the government to make it more difficult to get new loans has forced the price drop, either passively, for those who are now not able to get a mortgage. Actively it is affected by those who have the ability, qualification plus 40% down payment but understand the market is trending downward and if they wait it out prices will be forced dowm.

The lenient policies of mortgagors here gives opportunity for a homeowner to put off foreclosure and get his financial house in order. Foreclosure is a rare event since most homeowners obtained their mortgage within strict guidelines as well as at least 25% down.

Pscyhologically it is difficult for the homeowner who has seen an annual consistant rise in housing prices have to face the reality that their home is worth 11% less when it comes time to close the deal.

In newer construction neighborhoods, I have observed that the same units are sitting on the market, many since last fall, refusing to lower their price to the new levels.  Those who must sell are seeing the 10% drop not in asking but in order to close the deal.

Buyer vs. Seller stalemate

According to Ynet news several months ago realtors were predicting a 10% drop in real estate prices next year.  Recent conversations with a number of strong producing real estate agents reveal the stalemate in apartment prices is due to a public expectation that prices will drop.  Seller’s in expectation of a normal rise in prices are holding on, unwilling to admit the market has softened.

Those who must sell are selling at roughly 5% less than the asking prices of 2010.  Many believe as seller’s are willing to make concessions that the market will move freely again.

Area, neighborhood and even street can see rises or dips depending on popularity.  Some periphery areas simply rose too high too quickly, whereas landlocked locations in Tel Aviv and Jerusalem still command strong prices. Beer Sheva saw a dramatic value rise, but is cooling off slightly.