More than forty days have passed since the beginning of the war, and according to data from the Ministry of Finance, the real estate industry is expected to go back twenty years in the current period. As evidence, the past month was the weakest in the housing market since the Ministry of Finance began recording the data 21 years ago.
Risk or opportunity? Construction site in Ashdod, photo: Yossi Zeliger
The real estate industry entered the war in the worst situation since the second intifada 20 years ago. The first eight months of the year saw an annual rate of less than 80,32 transactions, the lowest since the early <>s. Due to the lack of workers and the sites that remained closed, building starts declined further, and in the first eight months of the year there was already a decline of <>% in the number of young couples who purchased apartments.
Without security resilience on the borders, people will not rush to buy apartments in conflict zones. Take the government's program to help young people – "Reduced Price" – announced three years ago. The two main cities where the low-cost apartments were purchased are currently at the center of the fire – Sderot and Ashdod. According to the Chief Economist at the Ministry of Finance, in Sderot the average price of an apartment purchased under the program reached NIS 750,495, while the discount amounted to NIS 28,18. Attractive indeed. But will there be anyone who will buy in Sderot today even at such a price?
On the other hand, there is cautious optimism about the demand now expected from Jews around the world, and rightly so, in light of the rising wave of anti-Semitism. Israel today is the safe home for Jews, and a wave of immigration and demand that we have not known is certainly possible. But demand is already greater than supply, which is shrinking, and already high prices will climb even higher. According to a study presented this week by Ohad Danos, former chairman of the Real Estate Appraisers' Bureau, the third quarter summary speaks of double-digit annual price increases: in Netanya 11%, in Jerusalem 7%, in Tel Aviv and Petah Tikva 5%. The strongest declines were in Modiin – <>% (but that, too, after a dramatic increase in this city) and in Beer Sheva and Ashdod – <>%.
Give them protection
Where did the glimmer of hope for rebuilding come from? It exists under our noses. From the main engine of local real estate - urban renewal - that will give a bit of a push to a market that is in decline, while we hear about more and more tenants in condominiums asking "When will the renewal come to me with the life-saving safe room?"
The National Outline Plan for Reinforcing Buildings against Earthquakes – TAMA 38 – ended in early October. Interested authorities have been able to prepare alternative municipal plans, within which the validity of National Outline Plan 38 will be effectively extended. Postponing the local elections to January 2024 will probably allow the extension of those programs until May of that year.
The periphery, the data show, is neglected when it comes to urban renewal. In an existing protected space in the event of an earthquake or missile fire, and since urban renewal in the periphery is not a business that is economically feasible for developers, it is time for the state to enter the picture.
According to the 2022 report of the Government Authority for Urban Renewal, there are about 96,2022 buildings in the periphery that do not meet the standard of protection against earthquakes (or missiles) and were found suitable for undergoing an urban renewal process. In practice, the cumulative number of housing units approved in the periphery in evacuation-reconstruction plans until the end of 12 was 299,675 in the Southern District and only 61 in the North. For the sake of comparison, the number of housing units approved during this period was 51,499 in the Central District and <>,<> in the Tel Aviv District.
The state should remember that beyond the economic considerations, urban renewal saves lives, and the temporary order is to implement an emergency procedure to promote evacuation-construction projects.
Here, too, leadership is needed
"The construction industry is in the worst crisis since the establishment of the state," warns Raul Serogo, president of the Association of Contractors and Builders of the Land. According to the Association's forecasts even before the war, following the increase in interest rates, the contracting industry was characterized by a high risk rating, with 800 contractors expected to fail.
The construction industry consumes half a trillion shekels in credit. For the sake of comparison, this amount is identical to the annual budget of the Israeli government. Every day, contractors spend NIS 160 million, so not operating construction sites is a sure recipe for bankruptcy for many in the industry.
The public is currently preoccupied with matters of war, the national mood is low, uncertainty is great, Israelis are not currently buying apartments, and the market has almost completely stopped. The sales rate in the first eight months of the year reflects an annual rate of about 80,000 transactions.
"In light of the war, it is reasonable to assume that the pace will decline by the end of the year towards 70,000 transactions, similar to the low point of the second intifada that struck us in 2002-2003," says Revital Roth, director of analysis at Dun & Bradstreet.
Suffice it to mention that as of today, the construction industry is short of 90,85 Palestinian workers, constituting about 15% of the workforce. In other words, until a solution is found, the industry will work at <>% capacity.
Things in the end, as always, depend on the government. The buildings that are about to be populated Form 4 can release 50,50 apartments to the market immediately, and within two to three months it will be possible to house <>,<> families for new apartments with safe rooms. Serugu warns that "the state does not understand this and does not create solutions."
The need for protected space exists in cases of earthquakes and missiles, and since urban renewal in the periphery is not a business that is economically viable for developers, it is time for the state to enter the picture
After the war, the issue of housing protection will, we hope, be at the top of the public list of priorities. Hopefully, in this case, the heads of state will demonstrate the necessary leadership.
The need of the hour. , adding a safe room to an old house. Photo: Eyal Margolin
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