After two and a half months of war, it can already be said that the housing market is at an unprecedented low, and according to experts, Israel is going back twenty years in this area, to the days of the second intifada. Although there was a recovery in sales in November-December, in the long term, when the demand trend erupts, it will encounter a reality in which there are not enough homes. The growing interest from many Jews around the world who experience anti-Semitism may also increase demand, in the face of a growing shortage of supply.
On the other hand, the stock of unsold homes held by contractors reached a precedent-setting high of 7,61 on the eve of October 4, mainly in the periphery. This figure, by the way, helped construction companies provide apartments to evacuees in the first days of the war.
Wishing for quiet and renewed flourishing – Sderot,
For contractors it is necessary to embark on promotions with favorable conditions for sale. To the delight of potential buyers, it turns out that most of the new apartments offered for sale are in the central region – 30.7% of them in the Tel Aviv district (18,845 apartments) and 25.0% in the central district (15,365 apartments).
On the eve of the war, Ashkelon, the most targeted city, led the volume of new home purchases, with about 650 apartments in the third quarter (July-August-September). Jerusalem ended the quarter with about 490 apartments purchased and Tel Aviv-Yafo with only 374. Another city that experienced a boom on the eve of the war was Sderot, with 445 apartments sold.
According to the Chief Economist at the Ministry of Finance, Shmuel Abramzon, the most significant recovery in sales was recorded in the last week of October in the area of Rehovot and Nes Ziona, which includes Rishon LeZion, one of the most targeted cities during the war located outside the Gaza envelope. The Tel Aviv area is characterized by a particularly low level of sales, even higher than that of Be'er Sheva.
In the meantime, we continue to wait for the Bank of Israel interest rate to decline, photo: Oren Ben Hakon
But such a downturn is precisely the time when opportunities can be found. Take the promotions of the contractors, such as the Pershkovsky Group: as part of the special operation, only 15% is now paid and the rest of the payment for the purchase of an apartment in the Pershkovsky project at the President level in Haifa - at the time of occupancy. For a 4-room apartment that is part of the operation, you pay NIS 329,000 now and the balance in occupancy, and for a variety of garden apartments you pay from NIS 519,000 now and the balance in occupancy. In the new Neve Doron neighborhood of Ramla, the Group is also offering a special sale on only two penthouses - NIS 299,000 now and the rest of the payment upon entry.
Between two tenders
"The market situation depends a lot on how the war ends," says Roni Cohen, CEO of Eldar Marketing, "how quickly the sense of personal and economic-employment security of the country's residents in general and of the residents of the south and north in particular will return. The national mood is subtle and the real estate market is cruising at about 50% in terms of sales. In this situation, entrepreneurs do not approach tenders and are not in a hurry to start building new projects. I estimate that in about three or four months, towards Passover, we will see a recovery of the market, and with it the beginning of home price increases."
Rising interest rates are the main factor in Israel's housing market. In April 2022, the sharp rise began, raising interest rates from 0.1 per cent to 4.75 per cent within a year. Until that moment, contractors thought that prices here were only rising and paid a fortune in administrative tenders, and it seems that no one foresaw a collapse in sales and a drop in prices.
In the US, in parallel with the interest rate decision, which remained in place for the third consecutive time, the Fed's forecasts for the interest rate for 2024 were published. In the previous forecast, most Fed members thought that interest rates would be cut only twice in 2024, and now forecasts are for interest rate cuts of three times a year.
Dror Ohev Zion, CEO and owner of Dara Real Estate Marketing, says that it is very difficult to predict what 2024 will look like, mainly due to the uncertainty of the war and the possibility of another campaign in northern Israel: "The assessment is that we will see a decline in the interest rate during 2024, with the return of strong demand towards the end of the year, which will meet low supply, which will lead to an increase in prices."
The most troubling question for contractors is what will happen in the new tenders and what will happen with those construction lands purchased from the state during the boom at record prices and with high bank support, compared to the cheaper land today under much better conditions. The price differences between apartments whose construction will be completed in the old tenders and those whose construction will begin in new tenders will be enormous, without the ability to lower the price. And everything is won by the state.
Young people will have a harder time
And how much do you care for young people? Yes, those reservists who today risk their lives and leave their young families at home. Many of them were forced to return to their parents' homes, and home purchases by young couples totaled 1,142 in October, a decline of 53 per cent compared to October last year and a decline of 67 per cent compared to the previous month. Excluding government-subsidized purchases, purchases by young couples on the open market totaled 1,048 homes, a decline of 50 percent compared with October of last year and of 62 percent compared with the previous month.
On the part of Jews around the world, it is not certain that we will see an attack on the assets in the Holy Land, but there is certainly a sense of willingness. From France alone, 1,089 families registered in immigration files this year (i.e., initiating the process of aliyah to Israel), compared with 202 in the same period last year. From the United States, 691 immigration cases were registered last year, and today the number stands at 1,238. From England, there has been an increase from 98 to 140 cases, and this is just the beginning.
Cardan, for example, reported the sale of four apartments to foreign residents in Jerusalem's Holyland project for a total of NIS 16 million. According to Anna Fogel, VP Marketing at Kardan Real Estate, "The need to own an apartment with a safe room and living in a supportive community environment has increased greatly since the beginning of the war, and we are currently meeting families looking for large and spacious apartments, planned according to daily needs and in a quiet, safe and quality location. Alongside local interest, we receive many requests from Jews abroad who are looking for an apartment for their own use or as security in Israel, out of Zionist ideology and a sense of belonging and identification."
What about the future? Suffice it to mention that Israel's population growth rate is the highest among OECD countries – 2% a year – and according to the data, our small country should think about a second floor over the next two decades.
In conclusion, we should recall the words of Dr. Eyal Argov of the Bank of Israel Research Department, who warned in a recent Interior Committee discussion that the large inventory held by contractors will indeed lead to a decline in home prices, but that the shortage of working hands and the decline in construction site activity during the fourth quarter of 2023 by 50 percent will be felt in the coming years and will contribute to an increase in home prices.
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