Developers' special offers cutting new apartment prices

Sharp fall in apartment purchases credit: Tali Bogdansky
Sharp fall in apartment purchases credit: Tali Bogdansky

Although the real estate companies are still not admitting it, new home prices are on the way down.

When last October’s Housing Price Index reading was released, it showed the annual rise in prices crossing the 20% threshold, with no signs of stopping. Since then, however, things have changed: the three latest index readings show a cumulative rise of 0.5%., and the annual rate of increase has been cut by almost 6% within a single quarter. Even if the real estate developers are trying to broadcast business as usual, the price falls are impacting their sales offices.

True, the Housing Price Index has not actually fallen so far - in January it rose another 0.1%. But sales of new homes, the volume of which is much lower than it was a year ago, did not contribute to the price rise. Prices of new homes on the free market (i.e. excluding programs subsidized by the government) fell by 0.5% in January after falling 1.9% in December. According to "Globes’" figures, this means a fall of about NIS 90,000 in the price of the average new apartment. So even if the developers and contractors aren’t prepared to acknowledge it, the trend is being felt in the field. In fact, it’s sufficient to glance at the many special offers they have made lately to understand: the price fall is here.

The special offers that the developers and contractors have been making cover the whole country. What was reported by "Globes" two months ago as a small drip is now in full spatert, and everyone seems to be taking part.

Official comment on this phenomenon came last week with the survey published by the chief economist at the Ministry of Finance, in an analysis of the average price of new apartments recently sold in Kiryat Bialik. According to the figures, the average price of apartments sold in a round of special offers in the city was NIS 1.57 million, "just 16% higher than the average price of apartments sold in the subsidized Buyer Price program un Kiryat Bialik in 2022." A year ago, according to "Globes’" figures, the average price of a new apartment in Kiryat Bialik a year ago was NIS 1.8 million, 40% higher than the price of an apartment in the Buyer Price program.

Real estate companies have been making creative offers, resulting in a real reduction in the price paid, even if they refuse to declare lower prices.

For example, many of the companies are offering benefits in connection with the financing of the purchase. In the Kardan UP project in Nahariya, Kardan Real estate is offering a scheduling of 20% of the payment for an apartment when the contract is signed, and 80% after occupancy. The standard is 20% on signing and 80% shortly before occupancy.

In its Bereshit project in Beersheva, MBZ Development is offering terms of a NIS 150,000 payment only on signing the contract, 20% close to occupancy, and the balance after occupancy. Liba Construction Company is offering payment of 10% on signing and the balance on occupancy for a project in Kiryat Ono.

Other companies are offering terms designed to lighten the burden of mortgage repayments, which have risen following the rise in interest rates. Azorim is offering a year of mortgage repayments for its Oliver Tel Aviv development, which it is constructing together with Shalom & Natan; Electra Residence is offering a fixed interest rate of 0.99%, index-linked, for twenty years on projects in Rishon LeZion and Bat Yam. Other companies are foregoing linkage to the Building Inputs Index.

There also instances of companies offering actual price reductions, usually in pre-sale offers. Gabay Group, for example, in its SIA project in Netanya, is selling five-room apartments starting at NIS 3.1 million. Similar apartments in the project were previously sold for at least NIS 3.5 million, meaning a discount of 11% or more. As previously reported, Gindi Holdings is offering a 20% discount on apartments in its Gindi Ramat Efal project for the first 250 buyers, and it has now added deferment of the 20% down payment until 2030, interest-free and with no linkage.

RD Shbiro Real Estate and Investments is going even further. In its Shbiro Diamonds project in Petah Tikva it is offering six-room apartments "as new" for NIS 3.65 million. The company explains that these are apartments that were let for five years in a building constructed for long-term rentals. Now, at the end of the rental period, the company is selling the apartments - hence "as new’.

New six-room apartments in the neighborhood of the project sell for over NIS 4 million, and in some cases over NIS 5 million.

Published by Globes, Israel business news - - on March 20, 2023.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.

Sharp fall in apartment purchases credit: Tali Bogdansky
Sharp fall in apartment purchases credit: Tali Bogdansky
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018