French Immigrant Housing Trends

coastal housing

coastal housing

The tally of Jews immigrating to Israel from France has grown to nearly 7000 with over one thousand arriving last month. It is believed that terror attacks against the Kosher Market last January and threats against those protecting Jewish sites as well as mass desecrations of Jewish graves have brought many French to the decision of purchasing a home in Israel.

Buying trends for the French immigrants show that they are still buying in what was one of the strongest earlier French communities, Netanyah. Growth in the area of Ashdod, although quieted last summer due to thousands of rocket attacks near or adjacent to the city has not resulted in a real estate losses. In spite of the recent war Ashdod is growing strongly and steadily as prices increase there over 25% in the last two years.

According to an Advocate for a local law firm specializing in French language customers and reported on in Globes the French are buying homes to rent until they make the move, even buying “flips” older properties to renovate and resell. Many are also buying businesses here, “Clients that came to me were very interested in food, mainly fast food – hamburgers, pizzas, as well as cafes and patisseries. They’re bringing the knowhow here from Paris in the field of baking and food and that gives them a relative advantage over Israeli businesses.”

Communities along the seacoast are experiencing the highest level of growth from French purchasers, from Ashdod to Hadera. Jerusalem attracts a more religious French population who are attracted to the neighborhoods of Bakaa and Mekor Haim where there are French synagogues.

French Bakery in Tel Aviv

French Bakery in Tel Aviv

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Ashton Kutcher property hunting in Israel

Café on Tel Aviv's Rothschild Blvd.

Café on Tel Aviv’s Rothschild Blvd.

Ashton Kutcher, who is a serious Tora student, according to co-star from “No Strings Attached” Natalie Portman, was not in Israel for religious study recently, but is looking into investing in property on Tel Aviv’s Rothschild Blvd.

The actor is business partner with Guy Oseary, a producer in the US music industry who have invested together in a number of social media companies. The partners looked into the project at 22 Rothschild Blvd which is slated to rent for $35-41 a sq. meter. They are seeking a location for an office locally from which to run a center in Israel for high tech start-ups focusing on social media.

Kutcher has expanded his personal fortune with early investments in social media start-ups, including Twitter. He also heavily invested in Yoav Shoham’s Katango, Israeli professor at Stanford University, which was sold to Google for tens of millions of dollars about two years ago.

Change in tax codes – will it really help or hurt homebuyers?

The new finance minister, Yair Lapid has announced a change in the tax rate on the purchase of apartments to alleviate the difficulty “for young couples”.  The new tax rates announced that will go into effect on May 5th are that a home costing up 1.47 million NIS will not be subject to purchase tax. From May 5  a purchase of a home of any price for a first time buyer only will be a flat 3.5% for any priced home costing more than 1.24 million.
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The plan is designed to help only first time home buyers and to finance it by creating a betterment tax for those buying a larger or more expensive home even if it is their primary residence.

The current maximum purchase tax rate is 7%, on purchases of homes for investment costing NIS 3.26 million or more. On May 6, this rate will be lowered to 5%, and the threshold will be lowered to NIS 1.05 million. In 2011-2012 a tax freedom for the sale of an investment property (any home other than your principal dwelling) was temporarily offered to entice those holding investment properties to sell in order to create inventory which would help lower prices.

This new code primarily attempts to help the new home buyer. The government’s plan to finance this new tax plan will place a new burden and revenues on those who are moving up the housing ladder on a larger or luxury home, in essence the 2nd home purchase. Sale of investment properties or second homes will no longer be exempted from sales tax.

It is this writer’s opinion that the government has succeeded in its stated goal in late 2010 to forcibly burst any development of a housing bubble by increasing the minimum downpayment to 40% from a former more open market where the bank could opt for as low as 10% down to qualified customers. The effect of all of these measures has been to overall depress the housing market and impede first time home buyers who would be far more assisted with a low downpayment than a release from a purchase tax which might have formerly amounted to only a few thousand US$.

Statistics and Reality

bakaa balconySometimes statistics and reality just don’t seem to align.  Recent news indicates that housing prices are up 4.5% in 2012 and yet agents like myself will tell you the market has never been slower since 2000-2004.  As one who primarily deals with real estate in Jerusalem and Tel Aviv and their peripheries, most sellers have had to lower prices 10-15% lower from the highs in 2010 to secure a buyer.  It’s possible the statistic reflects this year only and not in relationship to the past three.

Still the price of housing here remains almost punishing in that Israel in its large cities is a market that affords only a small apartment for the price of 128 salaries.  Boiled down it means that the average couple earning an average salary each cannot afford basic housing in a major city or periphery with a 30 year mortgage.  And yet, somehow they buy.

Traditionally young couples are helped by their parents and moving up the housing ladder has allowed Israelis who already owned for a decade or more to see a significant increase in their property value enabling them to cash out for significant profit.  Before the shekel stabilized property was seen as the only way to have a savings account when runaway inflation regularly ate up the value of one’s money. Investors in those times now see a tremendous return, unlike those who invested in real estate in the USA.

 

Consumer Attraction

One of those undeniable truths of life is that if I suddenly am attracted by a fashion that I was formerly indifferent to, that somehow marketing, desire and scarcity have coincided to create a demand for a product.

Suddenly my own desires for apartment living have leaned toward the dream of either a garden unit or a penthouse with a large terrace space and view. I am joined in this dream with consumers around the country who are wanting the same, and now there is a shortage of penthouses in the coastal region as well as garden apartments and the moving trend is out of the city.

Penthouses in Tel Aviv have also reached demand exceding supply with even Donald Trump’s enterprises pushing for the project on Rothschild Blvd. to fulfill the complaint that “there is not a single nice penthouse in Tel Aviv”, quotes Ynet news.

There has been a trend in the last decade or slightly more to build buildings that include an outside space or balcony, to not have one now is considered a deficit to a property, like living on a high floor without an elevator.  Along with this trend there has been an increasing demand for pastoral spaces, the American Dream, a house with a yard.

The balconies were not that difficult to change the face of newer construction in Israel, but the demand for apartments with gardens has escalated along with the desire for a house with a yard.

This has caused a certain flight from the urban areas to more spacious areas that make a yard possible. Jerusalem in particular was noted in Ynet news.

 

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.

Oil, Israel and Real Estate

The largest reserve of natural gas, over 16 trillion cubic feet, has been discovered off the coast of Israel, and is estimated to be worth more than $95 billion, U.S. company Noble Energy Inc. announced on Wednesday, according to Ha’aretz.   

The Israeli economy is considered to be one of the best in the West, which should favor Israel as a continuing strong contender in the investment real estate market.

New housing starts rise 10%

Although the government continues to admit to a housing shortage which is driving prices of the existing market up, housing starts rose 10% over the first 3/4’s of 2010. 66,800 apartments were under construction in 2010.

After a visit to a recent housing fair where prospective buyers have the opportunity to compare building contractor’s latest offerings, prices for on-paper purchase were shockingly higher than previous years.  This author believes this will continue to drive the cost of the existing market up. 

With stats like these it is doubtful there will be a housing bubble with demand still exceeding supply.

Beer Sheva real estate awakens

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.

Luxury market returns strong in Capitol

The Jerusalem luxury market, which had slowed significantly in comparison to the overall robust market in the city is showing signs of a big return.  According to News 1, the luxury sales are rebounding.  Investors in the city are looking at the luxury market as a potential for the best overall return on investment in the near future.

New luxury projects are being sold on paper, Africa-Israel is now selling its newest planned development for 148 luxury units on Neviim St. (Prophets St.).  The company is now seeing a significant gain in its earnings in its ISraeli developments ending its 3rd quarter with a profit of 12 million as opposed to a profit of 4 million in the same quarter last year.

The company’s luxury buidling on Harav Kook St. had shown slow earnings in its early offering but is now more than half sold out.