Why is it easier to buy an apartment in the UK compared to Israel?

As in Israel, the real estate market in Britain has experienced an explosion of prices and a jump in demand in recent years, but apartment prices there remain significantly low and represent an opportunity. What are the reasons for this?

Dan Dobry, guest column

08/14/2022

Sunday, August 14, 2022, 12:52 p.m

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In the past two years, the real estate market in the United Kingdom has experienced an "explosion" of prices and a surge in demand, which brought it to historic highs not remembered for years. Since June 2021, real estate prices in the United Kingdom have been on a steady rise, and as of today, their rate of increase is measured at approximately 11.8% from year to year, and its price of an average house today stood at just over 293,000 pounds, according to Halifax.

The reasons for the price increase are varied. Starting with the transition to working from home, and ending with the monetary policy of the British government, which gave generous grants to businesses and employees and a government guarantee for business loans, amounting to 379 billion dollar. When the exemption from stamp duty, given to apartment buyers in properties worth up to 500 thousand pounds, from July 2020 to July 2021, which saved them tens of thousands of pounds, will fuel the demand even more.

In recent months, the beginning of the slowdown in the British housing market can be detected.

The war in Ukraine and the adjuncts of the Corona crisis, joined together and led to a commodity crisis and an increase in prices, which did not fail to rise either.

According to the United Kingdom's Office of National Statistics (ONS), inflation rates last June reached record levels of 9.4% compared to 9.1% measured in May, led by the increase in fuel and food prices.

As a result of rising inflation, the country's central bank has raised the interest rate in recent months, no less than 6 times, with the last time an increase of half a percent, from 1.25% to 1.75%, the highest interest rate increase in 27 years.

In the background, the central bank expresses concern about an inflation rate that may reach about 13% by the end of the year.

At the same time as the increase in interest rates and the subsequent increase in mortgage prices, the rate of increase in apartments in the UK recorded a slight decrease of 0.1% in June, according to Halifax, the first recorded during the last year.

Apartment prices are lower, despite the cost of living.

London (Photo: ShutterStock)

In recent months, the cost of living has been very strongly on the agenda in the British Kingdom.

The war in Ukraine created a significant increase in energy and food prices, which affects many Britons and which led the country's central bank to warn of an imminent recession.

Although, Britain only imports 11% of its oil and 4% of its gas from Russia.

However, the cessation of gas and oil exports to some European countries and a considerable reduction to others, lead to an increase in energy prices all over the world, with in Britain in the last year gas prices have almost doubled, according to the ONS.

Despite the rising cost of living in Great Britain, if we examine the numbers, we will still find that apartment prices there are significantly lower than in Israel.

In Great Britain, the average price that buyers will pay for the purchase of a residence for the first time is currently close to 225,000 pounds, and the price of an average apartment (of course not in London) in general, about 293,000 pounds, a little over 900,000 and 117,000 Shekel, respectively.

In Israel, on the other hand, the prices are much more expensive.

According to the CBS data, published in February of this year, the price of an average apartment is about 1.765 million NIS.

A difference of nearly half a million shekels.

When the average salary in the economy in Israel, as of June, is about 12,740 NIS and according to the Taxman calculator it is 8,900 bento without a training fund. In Great Britain according to the ONS, the median weekly wage is about 3,166 sterling, which on a monthly basis is close to 12,666 NIS and bento 2488 pounds which is 9,952 shekels.

Where is the UK housing market going?

Dan Dobry (Photo: Efi Yousfi)

According to the estimates, the rise in interest rates and with it the rise in the cost of mortgages, will slightly cool the rise in housing prices in Great Britain, when already today the figures of the Central Bank of England show a significant decrease in mortgage approvals.

However, the real estate market in the United Kingdom is expected to continue to show strong demand and a slightly more moderate price increase.

One of the main trends that reinforces this forecast is the continued adoption of the work-from-home model, which brings more people to want to move to a home, which will meet the needs that arise from this. According to a survey by -ONS In February of this year, 42% of Britons plan to work mostly from home. To these numbers should be added the survey conducted by the real estate website zoopla, which found that 54% of Britons who work mostly from home said they were much more eager to move, compared to only 13% of Britons who expected work less from home in the future.

The war in Ukraine and the commodity crisis it created is expected to continue to affect the world's economies in the coming months, when even after it comes to an end, the crisis with Russia is expected to continue.

However, the housing market in Great Britain shows a certain immunity, and demand and rising prices are expected to continue accompanying us, even in the near future, at least.

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