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Building on the interest rate: how do you know if now is the time to buy an apartment? - Walla! Of money

2023-02-24T06:32:53.406Z


In view of the cooling real estate market, the question arises of who can finance an apartment: buy or wait? We turned to some experts to try to answer the question that preoccupies many potential buyers


Let's say I can afford to buy an apartment.

Buy or wait for the prices to drop? (Photo: ShutterStock)

Many people who are interested in buying an apartment, including those who have considerable equity, have recently been debating the issue of whether it is the right time to do so or perhaps it is better to wait for a price drop?



The increased interest rates and also the difficult social situation cause some of them to recalculate their steps and wait.



"We have a certain amount of equity. We are deciding whether to buy an apartment now or wait for the prices to drop?"

It is a question that has recently been repeated frequently in various groups on social networks, and not only there.

To try to answer the million dollar question (in the central area, literally) we turned to some experts in the field, to try and get answers to the complex question.

Dr. Davey Dishtnik, senior faculty member at the Faculty of Management at Tel Aviv University (Photo: Private)

Investment or residence?

"I wish there was a simple answer to this," says

Dr. Davey Dishtnik, a senior faculty member at the Faculty of Management at Tel Aviv University

and a signatory of the economists' letter. for investment.

Regarding a residential apartment, I say that in the end we don't really apply economic investment considerations.



At the end of the day, 70% of the people in Israel own an apartment, and contrary to the myth of the 'Jewish mother' and the like, all over the world, in the advanced countries, this is largely what happens.

All over the world we see that people have a tendency to own an apartment.

It's not a financial consideration, it's not an economic consideration.

It's comfortable, it's the feeling of security, it's not moving the family, not moving the children from schools.

Therefore, with regard to a residential apartment, the above considerations hover above that."



What about an investment apartment?


"There is no right or wrong answer here, nor does anyone know what will happen. But we know that there are several forces at work now: the interest rate has increased, and it is known that an increase in interest rates is supposed to cool the real estate market, and data is also being published that indicates this.

I estimate that in the short term we will see some sort of cooling in the real estate market due to the increase in interest rates, because mortgages become more expensive, because when interest rates are raised property prices rise. But is this something that will last? Will it be dramatic? enough, as long as housing supply doesn't meet housing demand, then eventually prices will rise again. The real way to lower housing prices is to build enough. Are we going in that direction? I don't know. I don't think anyone can come and say emphatically yes / Not now for investment."



Distnik adds: "To the things I have already mentioned, we should also add the story of the Levin plan, which we, the economists, express concerns about based on our professional worldview. We fear for the long term for Israel's economy. As soon as this uncertainty also enters the picture, then it is clear that this too A consideration that needs to be taken into account. If our concerns come true and the risk in the economy increases and the business conditions here are less good, then this can also lead to higher interest rates - which can have a negative impact on both mortgages and real estate prices directly." It might be worth buying real



estate "Abroad at this time?


"This may meet the need to spread risks in the sense that not all your money is here, but on the other hand there are also risks in these things.

Far from sight, far from heart, you buy an investment property, you need to rent it, you are not there.

It is also possible to fall on a place that is itself problematic.

In Greece, for example, in 2011 there were huge troubles.

Therefore, there is no right or wrong answer here."



In any case, if in the end you decided not to make an investment in buying an apartment now, "then in today's era, when the interest rates are no longer zero, there is no point in keeping the money in the checking account.

There are other alternatives, such as a cash fund, or a bank deposit," says Dishtnik.

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Nir Shamol, CEO of the Urban Development and Renewal Company and the Shanir Company (Photo: Tal Shahar)

Will the reform have an effect?

"To purchase a property or not to purchase is a real dilemma that is evident among people today," says

Nir Shmol, CEO of the Urban Development and Renewal Company and the Shanir Company

, which markets real estate projects throughout the country.

"There are currently two new things that have been added to the balance sheet called the purchase of an apartment in Israel. Until now, the main parameter has been a matter of supply and demand, and prices have not stopped rising in the last 20 years. In the last few months, a dramatic change has happened. We have seen that on the one hand the era of cheap money is over, that due to



inflation All the world's banks raised the interest rate. Once they raised the interest rate, it affected two key parameters: on the one hand, customers have to pay a higher monthly repayment on the mortgage, and on the other hand, the banks also hardened their positions in granting credit.



Also, the developers and contractors rely on financing which is relatively quite high.

As soon as the interest rate went up, the banks tightened the credit policy, they made the interest rates very high and in this situation there are now fewer construction projects.

The entrepreneurs themselves are more afraid to enter into a new construction project, the bank is more afraid to give credit at the moment, and therefore there are also fewer construction starts."



Shmol adds: "Also, the social crisis currently existing in the State of Israel also affects people who are considering what they should do: should they wait and see Where is this crisis going, or perhaps is it precisely now that the developers are a little more stressed and there are more sales and discounts in the industry, now is the time to buy an apartment.

We currently see many customers who do not know what to do.

Every day I come across these questions."



What would you suggest to them?


"We need to separate right now between people who already own the property, and those who don't. Those who own the property, for whom nothing has changed, neither today nor 10 years ago. But everyone who is not in the game, has actually moved away from the dream of buying an apartment. For those who did not buy an apartment , I would suggest signing up for the 'renter price' and try to get this benefit. I would also suggest that people negotiate with the contractors and developers, take advantage of the situation that those contractors are currently selling less and try to get as many benefits as possible. If there is a good deal, don't wait and buy The power right now is not with the contractors but with the buyers. The market has turned from a seller's market to a buyer's market."



What is your expectation for the coming period?


"I estimate that we will have maybe a year or two of sales slowdown, there will be fewer construction starts, fewer transactions and then in two years when the wave will suddenly be released - either the social crisis will be resolved or the era of high interest rates will suddenly go down a bit - then in fact there will be a very big boom again and more At one time there will be a relatively large number of people who want to buy.



I see in the next year or two some kind of slowdown, a moderation in prices and maybe in some places a drop in prices, but in two years I foresee a big boom and once again prices will continue to rise dramatically. Therefore, those who do not currently have a residential apartment , he should get into the game.



If you find a good deal, I recommend buying right now and not waiting, but to negotiate, to bargain, to get such and such benefits - which eight months ago, for example, was almost impossible. In the not-so-distant past, the contractor said that 'if you don't Buys, then someone buys in 10 minutes."



What would you recommend to someone interested in an investment property?


"You need to check the deal specifically, to see that it's really a good deal, that it has the possibility on the one hand of a price increase and that there is also a possibility at the moment to rent the apartment."

Hanan Zaig, mortgage consultant and financial security expert (Photo: Israel Photo Productions)

The seed that rose, will come down

"The million dollar question now, in view of the situation of interest rates that have doubled compared to last year, is whether to purchase property or wait for the prices to drop," says

Hanan Tsaig, a mortgage consultant and financial security expert

.

"And I ask what your goal is. If your goal is an investment, then it is indeed worth examining whether this investment is economic and correct. If your goal is housing, then there is no question here at all because the alternative is renting. Therefore, you should definitely buy and not wait for prices to drop. You pay either a mortgage or rent, and in the end the flow is king."



Zaig adds: "The market is pretty much at a standstill right now, there are fewer transactions, people are sitting on the fence and waiting. On the other hand, demand in the State of Israel will always rise, everyone here wants to buy a house, it's not stopping. Maybe right now it's on hold, but the desire to be The owner of the house was not arrested."



And if the prices really went down?


"So I ask what does it matter, because it is clear that in the long term prices will continue to rise. The market works in waves. If you buy a house, you have a place to put the children, there is security, you can create a personalized mortgage. As the interest rate has risen, so is it It will also go down. When and how much? I don't know. But even if prices go down in the short term, and indeed there is such a chance, everyone understands that in the long term they will continue to rise because there is demand and no supply, and this is a law of nature. Even if you buy now at the most expensive, at the end of the



value More will rise. We have already seen that anyone who claimed that real estate is a bubble and waited, after all, in the long run, he lost.

You don't look at real estate in a month or two. Real estate is something long-term."



Zaig adds: "The situation in the country always affects the mindset, but as someone who looks at a broad-range strategy in his profession, I am obliged to examine the market in decades and not in a few weeks or months. Therefore, those who want to live in Israel and do not intend to leave the country and are debating whether to buy an apartment for living Or not to buy, then I have no doubt that it is worth and recommended to buy. Of course, today more than ever there is an obligation to consult with a qualified mortgage advisor, preferably a member of the Association of Mortgage Advisors, in order to create a mortgage that is indeed suitable for the family flow and to avoid risks."

Shirley Werner, franchisee of the Re/Max Ocean Tel Aviv Group. (Photo: Private)

"First of all, there is no doubt that there is a noticeable slowdown in the number of buyers," says

Shirley Werner, franchisee of the Re/Max Ocean Tel Aviv Group.



"This slowdown was more felt during January, in February we feel that there are more applications, but still fewer applications than in 2022. On a personal level, I think we will see a very significant revival in the second quarter of the year and beyond. I also believe that 'today's segment' is



becoming to be 'tomorrow's standard.' Out of necessity. Maybe people who are not really committed to change will take more time. We, by the way, also feel less movement of investors."



How would you characterize today's buyers?


"The current situation now leaves buyers more calculated, but also more focused and more mature. There are fewer buyers who do a market survey and walk around the market - which was the case in the past. There is still an expectation among buyers for price drops. In Tel Aviv it may be less noticeable because it doesn't matter what time it is The fact is, the supply is always lower than the demand. But if you used to throw a stone and it would hit, that's not the case today. About a year ago, people, in Tel Aviv at least, could throw whatever price they wanted and sell the apartment quickly. Today the prices are closer to the real prices, whereas The sales time is getting longer. We also see that more people are using mortgage advisors, doing a more organized financial calculation, trying more to negotiate interest rates."



What would you advise someone who is debating about purchasing a residential property?


"In any situation I always say: 'Buy where you can, live where you want'. Still in real estate money makes more money than any other investment channel."

  • Of money

Tags

  • apartments

  • housing prices

  • mortgages

Source: walla

All business articles on 2023-02-24

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