Demand is tough, and those who do not have to are in a hurry to sell the apartment. Meanwhile, prices are stable

• The impact on housing will come late

  Photo: 

  envato elements

Produced by the Department of Special Supplements

Recession - an indigestible word. Nearly 900,000 unemployed in the economy. A decrease of 8% in GDP, which means a loss of income of NIS 17.5 thousand per family from January. But, and here is a big but, housing prices are not falling, and even rising.

This is according to data from the Central Bureau of Statistics, published in recent days. It's hard to believe, but if you were expecting a drop in prices - this is just a virtual reality at the moment. According to the CBS survey, in May-June 2020, apartment prices rose by 0.4% compared to April-May, thus completing an increase of 1.9% compared to the corresponding period last year (May-June 2019).

A significant price increase of 3.9% was recorded in the past year in the Tel Aviv district. In the Haifa district, prices actually fell by 1.6%. The rest of the counties recorded relatively moderate increases and decreases. Or in other words: stability.

 New dwellings have fallen by almost 3% in the past year, due to an increase in occupant price projects. The average price of an apartment in Israel decreased to NIS 1.526 million in the second quarter of 2020, compared with NIS 1.621 million in the previous quarter.

So what's going on here? A recession must also affect housing prices, although the effect will reach this market with some delay. It is important to understand that an apartment is a product like the other products. When the economy is growing, there is no real reason why apartment prices will not rise accordingly. An increase in the standard of living inevitably leads to an increase in the prices of all products in the same economy.

An equal cut can also be made in the event of a recession, which reflects a decrease in economic activity, which in turn leads to a decrease in the prices of products, including residential apartments.

"The reason why the recession will arrive late in the housing market is that the demand for apartments is relatively stiff," explains real estate expert Ohad Danos, former chairman of the Real Estate Appraisal Bureau. "It may be possible to give up traveling abroad or going out to a restaurant, but it is more difficult to give up a roof. It takes a considerable amount of time until people reach a situation that requires them to get rid of the apartment they own."

Only now, about 6 months after the outbreak of the Corona crisis in Israel, have we begun to hear about buyers of price-per-tenant apartments who have difficulty meeting their mortgage payments and are asking the Ministry of Construction and Housing for a special permit to sell their apartment. On the other hand, there is also an onslaught on the remaining apartments at the price per occupant, due to the low prices in government subsidies (see an article in this magazine).

To the question of whether a recession in the economy will necessarily lead to a decrease in housing prices, the answer is somewhat complex and depends on the different harm to different populations as a result of the recession. In areas of demand there seems to be a moderate decline, if any, due to both the shortage of apartments and the financial strength of the players in these areas. In the periphery, due to exactly the same reasons, we may see a more significant drop in prices, which will also be strengthened by the government's policy of encouraging the move to the periphery by the Minister of Construction and Housing, Yaakov Litzman. Crucial days lie ahead.

Produced by the Department of Special Supplements