According to Ministry of Finance data, after October 7, home purchases declined drastically, due to the already high interest rate environment, the volatile political situation, and the lack of general optimism.
On the other hand, we are witnessing the opposite trend in the institutional market – insurance companies and investment funds – which are increasing their hold on the Israeli real estate market. For the public on the home front, an understanding of the institutional mindset and their processes is likely to make purchasing a residential apartment particularly economical at this time.
Institutional investors work in two ways.
The first is investment in female entrepreneurs or their projects. Recent examples: Menorah acquired 12% of Aviv Development's skyscraper project in Herzliya for NIS 45 million. It also joined Phoenix and became an interested party in Dönitz-Elad, acquiring about 5% of it for NIS 87 million. Phoenix and other institutional investors increased exposure to local indices, including real estate companies from the Tel Aviv 125 index and the international Khalaf index.
Clal has invested NIS 340 million in Africa-Israel for 20% of its renewal activity, and will establish a capital partnership with it of up to NIS 10 billion; Tshuva purchased (in a chain) 20% of the public WeeBox for NIS <> million, and in negotiations to increase Delek Group's holdings in Mehadrin.
The second is the purchase of apartments concentrated from developers, under optimal conditions. Tax Authority data indicate that the volume of transactions for the purchase of apartments in Jerusalem after October 7 doubled. In the Midtown Jerusalem project, in the Shari Israel Jerusalem project, and in other projects, concentrated apartment purchases were carried out, it is estimated that by investment funds.
The background to institutional optimism—the expectation in Israel of a decline in interest rates (so far reduced by 0.25 percent), the slowdown in building starts, the promotion of permits and the construction of existing projects, and the substantial increase in execution costs—are known to reduce supply and increase demand for apartments and contribute to the increase in their prices.
In addition, increased demand is expected in more urban and central areas. This is compounded by the lack of significant immigration abroad and the expected strengthening of immigration to Israel, which indicate, beyond the amazing national resilience, an expected increase in residential demand and housing prices. All of these, in today's low housing price environment, constitute a business opportunity for purchase.
Among individuals, the atmosphere and the political situation sometimes make it difficult to act with the logic, perhaps cold, of the financial institutions.
However, the main way for them to enjoy the economies of scale that institutional investors have, to strengthen their financial resilience and maintain a strong home front for the state, is to form groups of home buyers (each for himself) under optimal conditions.
The group has increased purchasing power, and with it the possibility of benefits of the following type (enjoyed by institutional investors and funds): a significant reduction in apartment costs, favorable payment terms, preferential treatment due to savings in marketing costs for the developer and upgraded specifications. Financing terms and purchase costs are also discounted, with concentrated services such as mortgage consulting, interior planning and more.
In contrast to purchase groups - all risks and responsibilities apply to the developer, including the necessary contracts for the planning and construction of the apartment, a commitment to price, planning and final delivery dates, and a guarantee of the Sale Law to buyers.
The background to institutional optimism—Israel's expectation of a decline in interest rates (reduced by 0.25 percent so far), the slowdown in building starts, the promotion of permits and the construction of existing projects, and the substantial increase in execution costs—are known to reduce supply and increase demand for apartments and contribute to the increase in their prices
A group of purchasers (and not a purchase) is subject to the protections of the Sales Law and the Investment Assurance Law, and the purchasers have no dependency or mutual guarantee between them.
Professional consolidation is required for the group in a short window of opportunity, before the sale of apartments and in the low price environment.
The choice of investment and project is made in a concentrated business plan and examination of alternatives, taking into account the stages of the projects, their areas, the identity of the entrepreneur, etc. - and through appropriate professionals.
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