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Why will the number of real estate transactions fall in the coming year? | Israel Today

2022-05-20T03:52:25.091Z


Rising interest rates, rising construction inputs, the stock market crisis and purchase tax cuts - these are just some of the reasons for the steep decline in transactions in the near future • And to the question of questions: Have apartment prices fallen?


The truth?

As president of the Chamber of Contractors and as the owner of a construction company that has been building all over the country for 60 years or more, I would be happy to announce to readers about the continuation of a positive housing market characterized by huge demand from buyers.

Unfortunately, however, my forecast for the coming year is not optimistic at all. 

I’ll start by saying that when I predicted a year ago that housing prices would rise by double-digit rates, I hesitated for a moment thinking that maybe I was exaggerating a bit.

I was almost the only one in the whole industry who foresaw the future.

Whereas now, we are facing a completely different reality, with the stock of apartments left for emissions "on the shelf" in the demand area currently stands at only about 12-15 thousand (!) And at the current sales rate will decline significantly and even be erased within a few months.

The heavy shortage, of course, will in itself result in far fewer deals, this is because contractors will not have apartments to sell.

Although the Minister of Housing reports to the whole world and his wife baseless reports of a so-called dramatic increase in the marketing of land for 100,000 housing units, in practice the number is much smaller, because many of those apartments have no reference at all, let alone licensing and permitting processes. The long ones.

So in practice this land marketing, even if realized, will be reflected in the housing market only in 4-5 years, at best.

Moreover, it was recently reported that apartments have risen in price by 1.3 percent over the past year, but in practice the rise in prices has been much higher.

First, the new apartments rose by more than 20 percent, which means another NIS 400,000 in just one year.

And beyond that, construction inputs have risen by about 7 percent, which means that far fewer home buyers will be able to meet the purchase burden and the amount of taking out a mortgage, as is well known, has limits.

If that wasn't enough, over the past year the land for construction marketed by RMI has risen by an average of 40 percent and in some places, such as Yehud Monosson, even more. In order for the projects to be profitable, the question arises as to what will this fact affect the continued rise in housing prices and how many Israelis will be able to meet the new price threshold?

To this we add the increase in inputs, which stems primarily from a severe shortage of construction materials as a result of the Russia-Ukraine war, the global inflation crisis that has forced banks around the world to raise interest rates and a growing shortage of workers in the construction industry.

And there are also the known problems of permit issuance procedures, outdated construction technology that causes an average construction duration of about 4 years approximately the average building in the State of Israel - this compared to less than half in the wider world.

And what about the rise in interest rates, which is expected to continue for another year, which will of course make it very difficult for mortgage borrowers, when already last April we saw a steep decline of tens of percent in mortgage volumes compared to previous months, with a moderate rise in interest rates of only 0.3 percent.

And what about the global mood The fear index that has been running over the last two months on all the stock exchanges around the world, including ours?

Real estate history, what to do, proves time and time again that as the fear index raises its head, real estate transactions also decline.

And what will happen to real estate investors? Well, after the severe (and unnecessary!) Decrees recently imposed on them by Finance Minister Lieberman, the first of which is a 13 percent purchase tax on a third apartment, I predict that their percentage of buyers has fallen to an unprecedented historic low. 

Meanwhile, the urban renewal stuck like an irreversible stone, both TMA 38/2 which has been swinging for a long time "between life and death" and evacuation of construction, when local authorities have no interest in promoting these plans, both due to low property taxes for residential construction and lack of Complementary infrastructure budgets, all of which of course illustrate the fact that even in the coming year, and probably also those that follow, the critical shortage of apartments on the shelf will continue, not to mention planning inventory and promoting construction starts for years to come.

And the question of the questions: Have housing prices fallen over the coming year?

Well, not at all.

There may be far fewer apartments on the market, but those individuals of virtue, who have the money at their disposal, who will fall for the remaining stock, will probably be willing to pay for them any price that may be required ... 

Were we wrong?

Fixed!

If you found an error in the article, we'll be happy for you to share it with us

Source: israelhayom

All news articles on 2022-05-20

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