The change in atmosphere in the housing market is reflected in Israel Land Authority (ILA) tenders, even in the highest demand areas. An investigation by "Globes" found that land prices in the main tenders closed last week showed a decline in land prices.
Some of the declines, including in the flagship tenders in Herzliya's Kiryat Shechakim, Rishon Lezion's Nuriot, Beit Shemesh's Hamishkafaim, and the southern outskirts of Haifa were significant.
In the final week of 2022, ILA closed many important land tenders. These included land for 2,509 apartments in east Yavne, 814 apartments in the southern outskirts of Haifa, 1,630 apartments in Kiryat Shechakim in Herzliya and 108 apartments in Rishon Lezion's Nuriot.
A review of the results of the tenders reveals that, unlike in the past, most of the winning bids were lower than the value estimated by the ILA appraiser, which indicates that the climate in Israel's land market has changed direction since the rise in interest rates began last year. A significant proportion of tenders closed last year were higher, and sometimes significantly, than the valuations of ILA appraisers.
Not all declines can be accurately quantified. For example, a tender in Yavne resulted in total price of land and development costs of NIS 380,000 per housing unit. This is an amount that appears to be extremely low, partly due to its inclusion in the "Target Price" government program.
However, the comparison with land costs per housing unit for tender held in Yavne six years ago as part of the Mechir Lemishtaken program, shows that at that time the price reached NIS 300,000 per housing unit - only 40% lower - indicating that land prices have in fact fallen in real terms.
In Herzliya's Kiryat Shechakim, a high land price of NIS 1.85 million per housing unit was recorded, which was also higher than the ILA's original value. But here, too, it seems that a year ago the tender could have yielded higher offers.
This can be seen in large tenders held in Ramat Hasharon in early 2022, where the cost of the land and development amounted to NIS 2.65 million per housing unit. However, it can be assumed that some of the difference is due to the different location and the different nature of the projects.
In July 2021, tenders were held for 598 apartments in Rishon Lezion's Narkisim neighborhood, as part of the target price plan. These tenders ended with land costing NIS 792,000 per housing unit including VAT and development. This week, a tender for 108 apartments in the nearby Nuriot neighborhood of Rishon Lezion was won by a bid of NIS 680,000 per housing unit, a decrease of 14%.
In Haifa's southern outskirts, tenders were closed this week for 814 apartments, at a land and development price of NIS 330,000 per housing unit. This is an extremely low price, since just a few months ago tenders were held nearby where a price of NIS 425,000 per housing unit was achieved, so these tenders represent a 22% drop in land prices.
One of the reasons for the steep drop in land prices is because Haifa Municipality imposes obstacles on projects there. In previous tenders, land marketed more than two years ago will only start receiving building permits at the end of next year.
In Beer Yaakov a tender for land for 1,765 apartments resulted in an average price of NIS 750,000 per housing unit including development costs compared with NIS 770,000 per unit in 2021 in a 'reduced price' tender in Beer Yaakov.
The tender with the biggest decrease was for 300 housing units in Beit Shemesh's Hamishkafaim neighborhood. The tender was closed at a land price of just NIS 210,000 per housing unit, down more than 70% on a comparable tender closed in May 2021.
In part this is due to the plan which has some uncertain elements. However, such a large decrease can only be explained by the decline in land prices in the 18 months since the previous auction.
Published by Globes, Israel business news - en.globes.co.il - on January 2, 2023.
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