Home prices have peaked in Ra'anana

Construction in Ra'anana Photo Shlomi Yosef

Ministry of Finance: Prices dropped 3.8% in the third quarter of 2016 in Ra'anana, and fell further in October-November.

"We're already no longer in a housing market with rising prices. Prices in Ra'anana, for example, are on a downtrend," a developer in a National Outline Plan 38 company active in the town said several weeks ago at a real estate conference on urban renewal. "It is more difficult today to sell housing in Ra'anana," another developer active in the city said on different occasion. When contractors and developers say prices are going down, it is worth paying attention.

In order to understanding what is happening in Ra'anana, a city that has had the highest housing prices in the Hasharon area for many years, we examined the demand prices, the actual deals, the trends in recent months and years, and the planned future inventory. The results indicate that something is indeed happening in the pearl of the Hasharon area.

A decrease in the demand price

We will begin with asking price figures - the housing prices requested by sellers in Ra'anana. According to figures provided by the Yad2 online real estate website, asking prices for all types of housing in the town rose considerably over the past three years. In January 2014, for example, the asking price for a three-room apartment was NIS 1.328, rising to NIS 1.4 million in January 2015 and NIS 1.5 million in mid-2016. The situation with four-room apartments was similar: NIS 1.87 million in January 2014, rising to NIS 1.97 million in 2016 and exceeding NIS 2 million in 2016. The same pattern occurred with five-room apartments.

In recent months, on the other hand, it appears that asking prices have moderated, and even declined throughout the city. According to Yad2 data, the price trend for all types of housing was down in October, November, and December. The asking price for three-room apartments averaged NIS 1.52 million in October, NIS 1.516 million in November, and NIS 1.471 million in December. The asking price for four-room apartments averaged NIS 2.143 million in October, NIS 2.138 million in November, and NIS 2.074 million in December. The asking price for five-room apartments averaged NIS 2.63 million in October, NIS 2.62 million in November, and NIS 2.546 in December, a 3.2% drop. These, however, are the asking prices. In most cases, the asking price is higher than the final price for the deal.

A 3.8% fall

In order to examine the prices at which the deals themselves were closed, we asked the Ministry of Finance for data for deals according to figures from the Israel Tax Authority and figures for betterment tax. The Ministry of Finance examined the prices over the past two years, and the volume of deals, and came to two main conclusions.

The first is that the volume of deals fell, similar to the general trend in residential real estate in recent months. According to the data, a sharp decline in purchases of secondhand housing in the city was discernable in the second half of 2016, following a substantial rise in the first half of the year. The Ministry of Finance also said that the decline in purchases was accompanied by a steep fall from nearly 25% to only 16% in the proportion of purchases in the city by investors. According to these data, the market has cooled off.

What about prices? The Ministry of Finance figures support the argument that prices have changed direction. The Ministry of Finance wrote, "Due to the fact that the total of deals for new housing in Ra'anana is fairly small, and the prices of deals are likely to affected by a different composition of projects, the development of prices for secondhand apartments was examined, with an exclusive focus on four-room apartments (the most frequently appearing apartments in the flow of deals). The findings indicate that since the second quarter of 2016, when secondhand apartment prices in Ra'anana reached a peak (with a sharp rise in the number of deals), apartment prices in the city have gone down. Prices dropped 3.8% in the third quarter of 2016, and fell further in October-November."

The Ministry of Finance says that the figures for recent months are not final. Nevertheless, when asking prices for apartments, as we saw in the Yad2 figures, also show a downtrend, the sellers may have detected it, and asked for a lower price to start with.

A new neighborhood, a lot of urban renewal, and the buyer fixed price plan, too

The figures supplied by the Tax Authority for sales of apartments in recent months indicate that the number of deal in the town is really sliding dramatically. While the number of deals in the first half of 2016 averaged 80 a month, the number fell to 62 in July and only 28 in August, and the number is still falling.

Three other things are likely to affect the real estate situation in the city. One is that for the first time in many years, a new neighborhood with a considerable supply of apartments is being built in the town. Another is a developing urban renewal plan in the city. A large number of National Outline Plan 38 developers have come to town, and urban renewal plans are making rapid progress. The third factor is the buyer fixed price plan tenders that have been published in Ra'anana. Three tenders have already been published and closed, and another one is in the offing. The three tenders that have been closed have a total of 129 discount housing units, and the fourth, slated to be closed in the Neot Sadeh neighborhood on February 13, contains 82 discount housing units.

It is certainly possible that the new supply of housing in Ra'anana, with more slated for sale at a discount, is affecting housing prices in the city. The buyer fixed plan program is causing eligible buyers to wait, even though their chances of getting one of the apartments are small. The National Outline Plan 38 projects, with an emphasis on adding construction to existing housing, are frequently priced below the market price, and the new neighborhood in northern Ra'anana is likely to have difficulty obtaining the target prices written in the marketing plan. Furthermore, an examination by the Ministry of Finance Administration of Planning auxiliary unit shows that additional supply is expected to surface. Plans for 407 new housing units were approved in 2016: 154 in urban renewal projects on the Weizmann site and 253 more at the eastern entrance to the city.

Published by Globes [online], Israel Business News - www.globes-online.com - on January 22, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

Construction in Ra'anana Photo Shlomi Yosef
Construction in Ra'anana Photo Shlomi Yosef
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