Who in Israel buys houses costing more than NIS 10 million?
Importers, managers in the finance industry and hitechists are only in third place (Photo: ShutterStock)
The period of high tide and wealth is over: the prices of luxury apartments and houses in Gush Dan, mainly in Tel Aviv and Herzliya, are decreasing.
This may not be fully reported yet, but it will be so in the coming months and maybe even in the coming years.
The flames of the combustion engine of apartment prices in Gush Dan are dimming, whispering embers remain, the light money fire that was here for over a decade is extinguished for some luxury apartment buyers.
The available capital of the high-tech industry is receding like raging sea water receding during a downturn, in our case, the economic downturn that may be forming around the corner.
Some of the capital of the high-tech companies sought to flee abroad starting in February, after public statements with a committee, some fled and flowed abroad, some fled, perhaps fell into a sinkhole with the collapse of Silicon Valley Bank, SVB, will no longer be able to fully return without a wound And stripped of his body, his tail between his legs.
The retreat in demand for luxury apartments began as early as the summer of 2022 with the beginning of interest rate hikes in the US, following which the Bank of Israel went ahead and forced its hands through interest rate hikes, rightfully so, in order to curb inflation and the loss of the purchasing power of the shekel, especially for hard-working households
. Of the money, some of the hi-techists threatened in February, should be taken out of Israel, but they were now faced with a crisis in the American banking system with the collapse of Silicon Valley Bank followed by more banks on the list, perhaps ten on the way. These falls were added to the stagnation in economic activity in Europe where the banking system has not yet recovered from the 2008 crisis.
Chief Economist at the Treasury, Shira Greenberg.
writes in a report she published this week that an analysis of the employment characteristics of buyers in the luxury apartment market in Tel Aviv indicates a high dependence on the high-tech industry (photo: Ministry of Finance)
What is a luxury apartment?
The Chief Economist at the Treasury writes in a report she published this week, that an analysis of the employment characteristics of buyers in the luxury apartment market in Tel Aviv indicates a high dependence on the high-tech industry, which concentrated about a third of these purchases in 2022.
This dependence on high-tech is now becoming a double-edged sword.
In 2022, there has already been a 38% plunge in the purchase of a luxury apartment among employed households, of which at least one is employed in the high-tech industry, who purchased luxury apartments in Tel Aviv.
In the economy as a whole, in purchases of luxury apartments (price over NIS 10 million, as defined by the Treasury from 2021), there was a 31% decrease.
In Tel Aviv, purchases of luxury apartments - for the year 2022 - fell by 38%, simply because interest rates rose and the high-tech industry weakened.
This happened, of course, even before the establishment of the current government and the establishment of the legal reform that the coalition is legislating these very days.
A price of NIS 10 million to define a luxury apartment is arbitrary, perhaps there was room to set parameters such as a certain percentage of all sales, location, sea view - and also to update it to NIS 11.5 million for the year 2022. The total sales of luxury apartments in 2022 amounted to 417 units.
Please note, while the share of apartments in all purchases of apartments in the economy in 2022 was 0.4%, the revenue of the treasury from their purchase tax, luxury apartments, was 11%.
During the two years 2021-2022 in total in Tel Aviv there was a decrease in the purchase of luxury apartments by a rate of 48%.
While in Jerusalem the demand of non-residents to the country increased.
Demand also increased in Herzliya.
In Tel Aviv, buyers from abroad make up only 5% compared to 46% in Jerusalem.
In Herzliya in 2022, only 2% of luxury apartments were purchased by non-residents, after 9% in 2021. The average price of a luxury apartment in 2022 in Herzliya was 26.1 million shekels compared to "only" 19.5 million in Tel Aviv.
While purchases of luxury apartments fell sharply among the high-end sector, there was no change among doctors.
In 2021, 4.3% of luxury apartment buyers in Tel Aviv were doctors.
Another group of luxury apartment buyers are importers in the retail industry, with a salary income of NIS 450,000 per month, yes four hundred and fifty thousand NIS per month, according to Treasury data.
The data also indicate that when the income of at least one spouse originates from high-tech, they are only in third place after the major importers, followed by the senior executives in the finance industry.
The most expensive apartments were purchased by importers, over NIS 20 million per apartment, those with a high income in finance - over NIS 13 million per apartment - and the high-tech, "only" over NIS 10 million.
The prices of all apartments, not only the luxury apartments, increased in Tel Aviv in the two years preceding the months of November/December 2022 by 29%, in Jerusalem by 30% and in the center of the country by 33%.
There were also new increases in the rest of the country because of the low cost of capital, which is almost zero, and the scarcity of the supply of apartments for which the major regulator of land prices, namely the government, through the Israel Land Authority, is responsible.
In the south, prices have risen in the last two years by 27%, in the north by 28% and in Haifa by 32%.
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Prices in the supermarket are rising, importers are raking in capital and buying luxury apartments, knowing that all the government's talk about limiting their power is worth as much as the skin of garlic (Photo: ShutterStock)
Licensed practitioners
We will add what is not in the words of the chief economist at the Ministry of Finance: the income data of those dealing in imports, and the luxury apartments they purchase, clearly indicate a continuous desperation of the consumer public who is forced to pay exorbitant prices for import items, which are tens of percent cheaper abroad than in Israel. All the promises of the
government The current one, the previous one and the one that preceded the previous one, to increase competition through laws and regulations, evaporated as if they were not there. Promises on one hand and reality on the other. From the revised Law on Arrangements for 2023-2024, clauses that intended to reduce the power of the big importers, sort of monopolists on given brands, have disappeared.
Against the background of the increase in interest rates and the decreasing real net income, it is no wonder that the scope of taking out mortgages in February fell to a low of almost two years, a decrease of half compared to February last year.
In February there was a 10% decrease in taking out mortgages compared to January.
The fear of the relentlessly soaring prime rate, which was a better and cheaper route and has become a double-edged sword, is increasing.
The share of mortgages in the prime route has already dropped to 35%.
What further pushes prices down is the continued increase in residential construction: note, investment in residential construction increased in the last quarter of 2022 at an annual rate of 14.9% after 14% in the third quarter of 2022. In all of 2022 an increase of 16.6% was recorded after an increase of 13.7% in 2021 and a decrease of 7.8% in 2020. In 2022, residential construction built 46% more than in 2020, yes close to another half.
It's no wonder that the number of new apartments left on the shelf for sale jumped to about 54,000!
It is true that there is an upheaval: the demonstrations all over Israel against the reform in the legal field, already twice a week, which could lead to the overthrow of the government.
It is true that the Iranian threat has become more significant - it will be difficult to bomb the nuclear facilities in Iran from the air if the Saudi airspace is blocked due to the renewal of diplomatic relations between the Kingdom of Saudi Arabia and the Islamic Republic of Iran.
It is true that active American help or partial support is required in the bombing of the nuclear facilities as early as this spring.
It is true that there are high-text threats to take money out of Israel: abandoning Israel in favor of European countries or the US will also reduce the demand for apartments in Israel and increase the amount of apartments for sale by the abandoners (for example, the losing high-tech company "Riskified", whose value has been cut by a sharp rate since its IPO, which announced its intention to help its employees settle in Portugal, where an Israeli colony is created).
Interest rate increases continue and lead to a decrease in economic activity.
The soaring interest rate in the capital market is hurting and will hurt even more the construction industry in the housing market, which naturally depends on leverage.
The evil of imposing heavy import prices on the majority of the hard-working and quiet population, who only wants to allow perhaps a better education for the children so that they can work in profitable industries in the future, but it is precisely from them that funds are now being robbed, in the form of price increases, while the government fills its mouth with water.
And soon we may even see layoffs, which will further burden those who can no longer afford the mortgage payments.
When you raise the interest rate in the world, property prices decrease, including apartments and houses.
In California, house and apartment prices have fallen by 5.3% since June last year, this February.
In Sydney, Australia, house prices fell by 14% in the last year, in Melbourne by 10%.
In New Zealand house prices fell by 9% in the last year until February and are expected to fall by another 15-20% in the second half of the year.
In the UK, house prices fell by 2.9% from the August peak.
Compared to February last year, this is still an increase of 2.1%.
The increase in the interest rate in the money market, the difficulties in paying the mortgage, an increase in the price in the capital market, a decrease in the value of the public's property portfolio due to falling rates in the securities market and a retreat in the income stream of the economy from issuances abroad or exits, all together will, in my estimation, lead to a decrease in apartment prices in Israel in the luxury market. of 15% and for the rest of the apartments perhaps by 10% for the next two years.
A black swan, or the collapse of banks in the US, is only a signal: it will take years until the appearance of the pleasant white swan that we have been addicted to for the past two decades, until then we will crush each other and with noise Our eyes are wet from seeing and our ears from listening, the main thing is that everyone is right, according to his method - and to hell with the 75-year-old State of Israel.
Of money
Tags
Luxury apartments
High tech
importers
real estate