"Today's interest rate hike will set the housing market back 20 years" (Photo: ShutterStock)
Twenty years and nothing has changed? The sharp decline in home sales brings the real estate market back to the early 2000s, when the high interest rates in the economy, along with the dot-com bubble crisis worldwide and the beginning of the second intifada, which dates to Arik Sharon's visit to the Temple Mount, brought the real estate market to an unprecedented crisis.
Today, the pace of home sales in the last quarter is similar to the pace of home sales in the early 2000s, the years of the Great Real Estate Crisis, despite the fact that Israel's population is growing at the highest rate among OCED countries, and much larger today than at the beginning of the millennium.
This means that when people don't buy apartments, contractors don't buy new land for cash either, which could lead to a sharp decline in building starts and an unprecedented crisis in the real estate industry within a few months.
Construction (Photo: ShutterStock)
Nir Shmul, CEO of the Urban Development and Renewal Company, explains: "The phenomenon that occurred about ten months ago, when the Bank of Israel began the process of raising the interest rate in order to deal with skyrocketing inflation in all services and products in Israel, obviously led to a jump in monthly mortgage repayments by hundreds and thousands of shekels per month, according to the amount of the loan taken, which exacerbates the housing crisis in Israel, due to the inability of young couples. Existing and new borrowers, meet the monthly repayments."
The pace of home sales declined markedly in all regions of the country, with updated data from the Chief Economist at the Ministry of Finance showing the sharpest decline in sales volumes recorded by the city of Tel Aviv and the central region in general.
In addition, last February saw the sharpest decline in the rate of home sales in the past 20 years, which leads us, as mentioned, back to the early 2000s, which were the years of the great crisis in real estate in Israel.
More in Walla!
Virtual Reality Therapy: Treatment for Anxiety
In association with Zap Doctors
The housing crisis in Israel is intensifying
What is currently being felt in the market is a deep stagnation in sales, where there is stagnation that is reflected in very few buyers and very few sellers. Those who buy apartments are mainly housing improvers, who recently sold their apartment and need a new apartment, or buying apartments as part of buyer's price promotions for the homeless public and those eligible.
As a result, there is a sharp decline in the number of developers submitting new tenders, and land transactions for cash are becoming more and more complex in light of the developers' difficulty in selling the new apartments and obtaining financing on good terms. Most of the activity in the market at the moment is concentrated on long-term urban renewal projects, with the idea that there is no need to put big money in cash at the moment, and that it will take time until sales are launched - only within a few years, when the market returns to its previous level.
It is impossible to ignore the difficulties of real estate developers
Until recently, there are real estate developers who bought land at record prices, that is, until 18-12 months ago, and they are now dealing with increasing difficulty in selling apartments at the prices they planned to sell at the time of purchase, when the cost of land was high compared to today's prices.
The financing difficulties of these entrepreneurs may put them in a severe cash flow crisis if the market does not return to reasonable sales volumes. It is important to remember that not only mortgages have become more expensive, but also the costs of lending contractors and execution prices have risen respectively.
According to Nir Shmul, "Everyone in the market understands that the companies that are able to get through the crisis and survive in the next year or two, despite the financial and marketing challenges, will 'benefit' only when customers come off the fence, interest rates return to a lower level and the market emerges from the recession we are currently experiencing."
Five things you can do to improve the current situation
buy apartments and take advantage of the situation for tough negotiations; Buyers who wish to buy an apartment can conduct tough negotiations with contractors and enjoy benefits and conditions that they could not have received a year ago and may not be able to receive in a year, when the market emerges from the crisis. This is the time to buy an apartment when the market is in decline and developers want to make deals, because you can get unprecedented benefits and financial conditions.
Although there has been a sharp decline in tax collections (in real estate – more than 50% compared to the previous year), the state must lower taxes in order to encourage the market to act and so as not to stop the real estate industry, because stopping it could lead to a crisis that could endanger the local economy.
Learning from the United States and Europe; mortgage interest should be recognized as an expense, as is customary in the United States and several other European countries.
A state guarantee should be given to tenders for rental apartments, so that the market that began to flourish a few years ago will not end now, when interest rates are high and many developers are "fleeing" from this market, which was the fastest growing market in Israel until not many months ago, alongside urban renewal.
sales promotions and good conditions for employees and the public;when the audience feels that there is a good opportunity, it buys. Entrepreneurs who wish to sell during such a period must embark on attractive sales promotions so that precisely in today's market employees and the local audience will purchase properties, when they feel that the transaction is really worthwhile. Entrepreneurs who do not adapt to existing market conditions are simply left behind and may be stuck with goods for a long period of time, with high financing costs.
- Real Estate
Tags
- Real Estate
- interest
