Not long ago I posted a blog entry about the IDF selling land in central Tel Aviv, Hakirya district, to help finance the major move of all their operations to the Negev, Beer Sheva in particular.
Now according to Haaretz, Beer Sheva is set to be the site of a new high tech boom. Not long ago Benjamin Netanyahu promised that Be’er Sheva was destined to become “the cybercenter of the Western hemisphere.” One thing I learned from statements about development by the Israeli government is that if the government is supporting it, it will happen. Modiin and Rishon Lezion were slated nearly 20 years ago to become the largest and fastest growing new cities in Israel and now Modiin has become a highly desired location with real estate prices approaching a median of 1,600,000 for a standard 4 room apartment.
With the creation and expansion of a new high tech park there some software and cybersecurity giants have invested in Beer Sheva companies. Paypal recently announced in March it was buying the Israeli startup CyActive, a cyber security company out of Beer Sheva and entered Nasdaq last September.
Companies in the park include foreign and local firms such as Deutsche Telecom, RAD, Lockheed Martin, Ness technologies, Elbit Systems and EMC. The National Cyber Bureau, an agency created for the purpose of cyber security will also be housed there in a few months.
The biggest problem will be housing for expected newcomers. Housing starts were down last year, land has been released by the government for building. Pent up demand will force prices of existing housing up and with the cities new growth via high-tech and the army moving its operations there, a boom can be safely predicted.
photo of Beer Sheva road
A decline in apartments sold was felt all over the country in the first quarter with a 15% drop in sold apartments from the last quarter of 2012 to the first quarter of 2013 according to the Central Bureau of Statistics. Statistics reflect Hadera to Beer Sheva, where there was a 27% drop. This statistic differs from my April 23rd post which also included housing starts bringing that figure to 20% from the prior quarter.
Most affected by the current real estate market are young couples and young adults where sellers still hold on to high rental prices as well asking prices for sales. The young demographic is choosing to remain at home, living with parents. High real estate prices and the austerity measure of 40% down payment required by the bank of Israel are the main cause.
In Israel unemployment levels are healthy at about 4.5% but the basic salaries for those entering the job market are hindering affordability to young people. Young adults and parents here are choosing to wait out the trend downward hoping for lower prices as well as a change in government policy making housing more accessible and affordable. Traditionally parents in Israel will help their children to purchase, but wary parents are also looking for a decline in prices and required downpayments.
A similar situation can be found in the United States but has been created for different reasons, housing and rental prices are still affordable in most major US cities but the lack of even minimum wage jobs is causing a staggering 85% of college grads with bachelor’s degrees to return home to live with parents according to Time Magazine study. Of these grads 54% are unable to find work and instead move on to higher degree education hoping to be in a better position while waiting for economic recovery.
According to today’s Jerusalem Post home prices are expected to rise quickly across Israel. The Bank of Israel’s government appointed head, Stanley Fischer will likely take macro-prudential measures to try to control this expected price rise.
Israeli’s traditionally believe in housing as the most solid investment for themselves and their offspring. In order to combat this national tendency Fischer is raising the interest on funds deposited in the bank 2.25% as an incentive to keep the populace’s money in the bank rather than invested in real estate.
In spite of actions taken in the summer to increase cash downpayments to 40% the number of loans given was 10%higher in Oct.-Nov. than last year Dec. 2009. Last year, house prices increased 17.3% as interest rates remained low and the supply of houses fell short of demand.
Last quarter areas in the country that had not seen steady rises suddenly rose sharply, Beersheva and Hadera 8%. Jerusalem and Tel Aviv steadied at a 3% rise. Only Eilat saw decreases at 4%.
Housing prices since 2008 have risen overall in the country a whopping 29.4%.
Long considered a poor city with little to do in the desert except go to University, Beer Sheva is awakening and rising in value rapidly as other markets soften on the high end. Bargains are still to be found here, 3-room apartments near the University selling for roughly $120,000 US, but more villas and luxury units are beginning to be built as cultural, shopping centers and the desert climate are attracting those who formerly spurned the city as having little to offer.
Recent months has seen a 26% rise in real estate sales in Beer Sheva, many considering it the new investment market offering the quickest short-term return.
A new project of Abessror builders is launching two luxury towers which will house 156 units with the largest 5-room unit of 133 meters selling for 1.28 million NIS.