2023 was a year of upheaval in the Israeli real estate market – after home prices jumped at an annual rate of 20% at the beginning of the year, in recent months we have already seen a decline in prices. Meanwhile, the real estate industry faces an acute shortage of working hands.
How will this affect the price level in the housing market next year? And is it worthwhile to purchase an apartment as part of apartment lotteries at a discount? Raul Serogo, president of the Association of Contractors and Builders of the Land, answered all questions in an interview with "Added Value," Israel Hayom's weekly economic podcast.
"Home prices are falling, that's a fact. Both because of the high interest rate and because of the war," Photo: Dudu Greenspan
Asked whether it was time to buy an apartment, Serugu replied: "Home prices are falling, that's a fact. Both because of high interest rates and because of the war. The decline at the moment is moderate, because contractors are vaccinating themselves, they are responding to the market, they are building less and they have less pressure to lower prices. They (the contractors) say I'll sell what I have first, and then I'll start a new building."
"There are currently 62,<> apartments that have not been sold, but they are not finished, some in the foundation stage, some in the final stages. It's not such a high number, and the contractors are certainly accompanied by bank escorts, to whom the bank guarantees all credit until construction is completed, not under pressure to sell the apartments. By the way, one of the reasons the contractor doesn't lower prices is to maintain the mood and satisfaction of those who bought before, so contractors aren't in a hurry to lower prices so as not to spoil their relationship with existing tenants."
Serugu continued: "Regarding your question, I say that home prices in the near future are slow, but the end of the war will be a game changer, and unfortunately it will lead to a dramatic increase in home prices. I say whoever needs an apartment should buy the apartment now, and whoever doesn't need an apartment and is looking for an apartment for investment can wait to see what happens in the market. But a young couple who got married or a family that has to move to a bigger apartment, it's time now to buy an apartment, and today you can find better bargains."
"In the central region, prices are still too expensive." Tzahala project in Tel Aviv (illustration), photo: Amit Geron
As for the question of which areas are better for purchase, Serugu says: "I think that in the central region the prices are still too expensive, but they are the most attractive - Tel Aviv, Ramat Gan, Givatayim. In terms of future home price increases, in the central region prices will rise less, and in the periphery – more."
What should someone who registers for apartment lotteries know at a discount?
Serugu believes that buying an apartment through the "apartment at a discount" lottery can be worthwhile for young couples, but it is necessary to take into account the construction time, which may be especially long these days in view of the acute shortage of working hands in the real estate industry. "There is no doubt that it pays off. Whoever wins an apartment at a discount or price per occupant, there is no doubt that a young couple earns a lot of money. At the same time, you have to take into account that you are taking a risk here. The risk is that the project will materialize in the future while it is unknown, and this creates other expenses for the young couple that they did not take into account, such as rent."
Serugu added: "My criticism of these lotteries is that they are done without any income test for those who sign up to buy an apartment. We saw quite a few who won and their monthly salary is 40,50 or <>,<> shekels a month per couple, I don't think they need a lottery. It's about affordable housing, and affordable housing should be given to those who need it."
He addressed the issue of the shortage of workers: "The state should allow the contractors themselves to bring the workers, we know how to contact manpower companies and large contracting companies. This will shorten the processes." Despite the severe shortage of workers, Sarugu is merely satisfied with the performance of the government and the Minister of Housing and Construction, saying: "The Ministry of Housing is actually revealing itself in all its glory in the war. Not a week goes by that the director general of the office doesn't talk to me and try to help solve problems, as do all the clerks in the office. But it's hard for them to get results because of regulation and bureaucracy."
The "Discount Apartment" project, photo: Yehoshua Yosef
Asked what grade he would give Housing Minister Goldknopf, who is wrapping up his first year in office, Serugu replied: "The minister is a very positive man, trying to convey optimism and trying to help, he has a lot of good intentions. He walks into the office unfamiliar with the industry. But this is a question in itself that has to do with our system of government – ministers are appointed to positions for which they have no background and no time to study, and the question is whether it is not better for the tourism minister not to be a former hotelier, the finance minister an economist and the housing minister to be someone who comes from a background in the construction industry." Sarugu concluded: "He has a lot of goodwill and in general he is a good minister for the State of Israel."
"Reduce the purchase tax for precipitation"
Serugu shared that he met with Finance Minister Smotrich and presented him with data that surprised him. "In real estate alone, tax revenues in 2023 were about NIS 33 billion lower than the figure for 2022. On the eve of the war, we saw a dramatic decline in building starts, and there is no doubt that this affects state tax revenues."
"A very positive man." Goldknopf, Photo: Jonathan Shaul
"I explained to the Finance Minister that beyond the fact that workers must be brought into the industry, the construction industry must be accelerated, and a situation must be created in which the industry will accelerate forward through tax reductions, for example by reducing the purchase tax for investors that will cause investors to return to the market. There's an argument that says if investors come back, prices will go up. I say no, because the stock of homes will eventually increase, and the effect will eventually be in the direction of falling prices."
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