The stock markets are going down.

How does this affect real estate in Israel?

The dramatic changes in world economies, production costs and geopolitical order (some of which happen once every hundred years) are affecting the real estate market. All recent headlines have told us that the US luxury market has begun to experience slowdowns and declines.

So what's going on here in Israel?

We went out to check

Walla!

Real Estate

20/06/2022

Monday, 20 June 2022, 09:08

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The world stock exchanges have recently been painted red, and at the same time there are reports and updates about the slowdown in the real estate market in Israel. Is there necessarily a connection between these things and are we expecting a significant calm in the market in the near future?

"The main reasons for the declines are two disciplinary variables - rising inflation in the United States and Europe, which is approaching double digits - a record high of 40 years in the United States and a record high in inflation since the establishment of the European Union," said Nir Shmol. At Snir, "In Israel, too, we are witnessing rising inflation, albeit in lower numbers than in the United States and Europe, but the clear direction is rising.

To cope with rising inflation The world's central banks are raising interest rates, in order to reduce consumption and try to moderate price increases, but when interest rates rise, debt rises and in many cases a significant rise in interest rates leads to a long-term market recession.

"That is, interest rates are rising, the capital market is cooling and there are sharp declines as we are experiencing in recent months."

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Helplessness in the US. And what about Israel? (Photo: GettyImages, Michael M. Santiago)

Nir Shmol (Photo: Tomer Feder)

Eyal Shiman (Photo: Shai Adam)

"How does all this relate to the real estate market?" "Until the last few months, the market has been very affected by investors who bought real estate and housing improvers. It can be seen recently that more housing improvers are buying real estate at the expense of the investor segment, but we have to wait a while longer to see if this is a trend or a passing point.

"At the moment, real estate prices are not falling yet, but the amount of transactions is decreasing and the time to execute each transaction is increasing, which means people are more apprehensive, checking and more careful."

"Dramatic changes in the world have economic consequences and in our case, the war between Russia and Ukraine and between Russia and the world is dramatic," says Eyal Shiman, CEO and owner of Laminam Israel. The modern, ancient and currently severe escalation there has a profound effect on the strategic thinking of Western economies.

This thinking once gives its letters in countries that have not joined, for example, NATO and now seek to change the decision, and another time on the energy security of each country, the need to change dependence on Russia and its metastases and perhaps invest more in other alternative energy and not necessarily oil and gas. We are seeing this in the prices of goods that have risen by hundreds of percent in the last year, when the start was already in April 2021 even before the actual war began - even then there were costs in gas prices that continued to other products like clay,

Great competition in the porcelain market.

Surfaces of all kinds (Photo: PR)

So what about Israel?

In fact, here is a line according to Shiman: "We as importers absorb the costs in the country. There is a competitive market here, we have a variety of products and brands, so our profitability is not harmed either. The real estate market in Israel traditionally suffers from shortages.

There is a shortage of construction starts chronically, it should be remembered that every year tens of thousands of young couples get married and also get divorced and there is constant pressure and demand.

Construction starts each year fail to cover demand.

The decision to purchase an apartment or upgrade is strategic.

Even if the interest rate goes up, and the mortgage goes up and the construction input index goes up due to the costs of the concrete and manpower, people buy and exchange apartments and move on.

Demand is relatively high for supply.

"We provide the services to the construction industry, so when a person buys an apartment and needs flooring, marble for the kitchen, kitchen cabinets and sanitary ware, the demand in this context is tough and therefore we are less affected."

Will the luxury apartment market catch a cold?

Planning and design by architect Marina Rechter Rubinstein (Photo: Amit Gosher)

Ron Landsman (Photo: Nimrod Cohen)

According to Ron Landsman, CEO and owner of a real estate agency and a mentor for real estate agents, "The real estate market in the luxury sector can be hit due to the sharp declines in the stock market in Israel and around the world. In general, deals in the luxury market are slow and such a house can be on the market longer compared to less prestigious projects.Currently, I do not feel there is a slowdown in this market, but I have no doubt that if interest rates go up, mortgages will go up Mostly static. Even in the general market at the moment there is no slowdown in the real estate market.

It is important to understand that it takes time for things to seep through.

It's not that the stock market is going down and hop, people are rarely making purchases, but in the long run it could have an effect. "

Architect Marina Rechter Rubinstein, owner of ReMa Architecture, also thinks the story is complex and mostly slow: "Fortunately, the Israeli market is taking time to digest processes that are happening abroad and it seems that this is in our favor at the moment.

Therefore, the situation today in the market remains as it was, buyers who are already in the process continue with it and there are also many new acquisitions.

We are today in a situation where once people have the money to buy an apartment they will make the move, we have already realized that it is not always wise to sit on the fence because the market is on the rise.

"So both in the design and renovation and in the field of offices, the buyers have already prepared a budget and they use it, there is no going back."

Customers go for other functions.

Kitchen by Niga Chef FOR HOME (Photo: Yachz)

Yael Moskowitz, VP of Marketing and owner of Niga Chef for Home (Photo: Smadar Kafri)

"Customers today think long-term, making the distinction between cheap liqueur and products that will suit them accurately," says Yael Moskowitz, VP of Marketing for Niga Chef FOR HOME. A variety of functions in one device instead of two or even three different devices.

In this way, they benefit more from quality products that will accompany them for longer years. "

Effects of the state of the economy on the real estate market / Nir Shmol

• 1 .

  Usually when the stock market goes down, investors leave the capital market and look for other alternatives to investing and therefore the demand for real estate increases alongside the investment of funds in PCMs and savings plans in banks when interest rates rise and the investor gets a handsome return on his money.

• 2.

  When interest rates rise and the capital market falls, most people are afraid to take out loans and mortgages that become more expensive due to rising interest rates.

• 3.

  When price indices rise and especially the construction input index - people are afraid to buy an apartment on paper.

  This is because in 4-3 years when the apartment is ready they will have to pay additional significant sums of money in light of the high linkage.

• 4.

  Public companies are greatly affected by the fact that the value of the company decreases and is cut significantly and usually to restore investor confidence they should take streamlining measures including layoffs, wage cuts etc. which may lead the market to recession when wages fall and unemployment rate may rise.

• 5.

  One should pay attention to the value of real estate companies that are currently cut on average by about 40 percent compared to past highs (not so far away a few months ago) and in some cases low equity against liabilities. Will be able to meet all their obligations when interest rates are high, debt is rising and perhaps people are buying fewer apartments at record prices.

• 6.

  Israel's housing stock is still low against demand, which means that Israel leads in the number of children in all OCED countries and needs many more apartments in the next 30-20 years compared to supply, moderating the possibility of falling prices in light of the high demand exceeding supply.

• 7.

  The global high-tech crisis due to a significant cut in the value of companies on all world stock exchanges, brings a high-income target audience with high equity (in light of options it received related to the share price) whose equity has now been wiped out ( Real estate assets by this market segment which was very significant in the category of buying apartments in Israel and around the world.

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