House with garden prices outstrip average housing price rises

House in Givat Ella Photo: Paul Orleib

The Covid dash for the country, and inadequate marketing of land by the Israel Land Authority, are pushing up house and garden prices.

Israel's real estate residential market is rising fast but prices for a house and garden are rising even faster than the annual national average of 5.6%. Real estate market sources in northern and southern Israel say that price rises for houses and gardens, and land for building houses, can be measured in tens of percentages.

Real estate developers believe that the dream of a house and garden has received a boost from the Covid-19 pandemic, while the low supply of land for marketing by the Israel Land Authority is further contributing to the rise in prices.

Take the Kalaniot neighborhood in Beersheva, which is in the west of the city north of Road 25, which links the Negev capital with Ofakim, Netivot and Shderot. Prices here have risen 45% over4 the past 12 months from NIS 1,900 per square meter on 300-500 square meter lots to NIS 2,750 per square meter.

Beersheva-based real estate appraiser Ohad Vertesh said, "What is happening in this neighborhood is really difficult to explain rationally. In November 2020, lots were sold there for NIS 900,000 and after that prices rose to NIS 1 million and by January and February they had already jumped to NIS 1.3 million and even NIS 1.4 million. There are some lots that have recently slipped to NIS 1.15-1.2 million. The market there is going wild."

As this is a new neighborhood, there is not even really a big market for the houses. Prices of some deals completed recently were for NIS 2.38 million. Due to the rise in prices of the land, the price of a house in the neighborhood can reach NIS 2.8 million today and even more. Are people really ready to pay this price for houses in the neighborhood or has a local bubble been created for lots? Vertash admits that he simply doesn't know.

He said, "When a person decides to build a house and allocates NIS 2.5 million for it, he doesn't see the rise of NIS 50-100,000 in the price of the land as terribly excessive for the budget, and he pays. Does he make a calculation for himself that at that moment, the price of his property will be far above the acceptable prices in the neighborhood? I'm not sure that everybody does that but the fact is that after high prices were received at the beginning of the year, even higher than today, people took a step back."

Lahavim: Demand has been rising

The price of land in Kalaniot does not operate in a vacuum and the situation is similar in other suburbs of Beersheva. So for example, 500 square meter lots in Lahavim north of Beersheva have risen 23% in price to NIS 2,540 per square meter over the past year. Moreover, the number of housing deals in Lahavim has also increased over the past year to 39, from 24 the previous year, including 29 deals alone between May and December. Since the start of 2021 and the end of May, there had already been 22 deals.

Record shattered in Givat Ella

In the north, Givat Ella is a small town in the Jezreel Valley with the oldest houses in the center on 800-900 square meter lots. The prices of these houses moved between NIS 2.7 million and NIS 3 million in 2019 and 2020. The highest price obtained was NIS 3 million for a 240 square meter house. In August 2020, that record was equaled when a detached house on Dan Street was sold.

Then several weeks ago the record was shattered when a house on Givat Ella was sold for NIS 3.8 million. "The buyers came to us before the purchase and asked us for an appraisal. We valued this house at NIS 3.6 million - and that was also very hard - and despite that the buyers paid NIS 200,000 more," said appraiser Assaf Gastfreund from the first that supported the deal.

Shimshit is another village in the Jezreel Valley, which has both detached and semi-detached houses on 400-500 square meter lots. The price of houses in the village in 2019 and 2020 ranged between NIS 2.7 million and NIS 2.8 million. At the start of 2021, a house on Shimshit was sold for NIS 3.15 million.

In the east of Atlit, south of Haifa, five tenders were closed several days ago for 500 square meter lots, not far from the Coastal Highway (Road 2). On each lot three houses can be built. The tenders were closed at NIS 2.17-2.95 million each not including landscaping expenditure. Only six months ago similar tenders were closed nearby by the ILA at prices of NIS 1.2-1.4 million. So in just six months prices of land doubled in Atlit.

Something similar but not quite as extreme can also be seen in Ramat Hasharon where land tenders were recently closed at NIS 2.2-2.3 million per house compared with NIS 1.8-1.9 million just five months ago. A rise of 20% in a high demand area near Tel Aviv and it is the development companies pushing up these prices in the belief that there will be buyers for the houses they build at the prices they will be asking.

NIS 3 million per house in Karmiel

Back even further up north, the market for houses is also booming. In Givat Makosh in Karmiel there have been no all-time high records but the average price of deal for detached homes is already NIS 3 million.

In Kfar Vradim, the market is really hitting new peaks. There was a time when very few houses were sold for more than NIS 1.8 million but now there are homes costing more than NIS 2 million. Prices vary greatly in the town due to size, the age of the property, and the neighborhood.

Anglo-Saxon real estate agency franchisee in Kfar Vradim Nati Sheinfeld explained that a high density housing building project was recently begun in the town, which has gained great popularity, with relatively low prices of NIS 1.2 million for apartments. But when it comes to houses with gardens the supply has fallen compared with recent years, which has pushed up prices. In his estimation, prices of houses in the town have risen by hundreds of thousands of shekels over the past two or three years.

The reasons: Less marketing, more available capital

So why are prices rising so fast. Vertash blames the ILA for failing to market almost any land for houses and gardens in recent years coinciding with the Covid pandemic and more people looking for houses and garden further out from the big cities.

He said, "The Kalaniot neighborhood is probably the only place where you can buy a lot in Beersheva. In the past we saw in Lahavim how prices fell when the ILA marketed hundreds of lots. Now we see no land being marketed in Beersheva and the satellite communities and this influences directly on prices."

Sheinfeld agrees with Vertash. In Kfar Vradim the ILA marketed 78 lots in 2013-2014 and since then high-density building, which lowered the prices of property in the town. If at the low-point 120 properties were offered for sale in the town, today only 30 properties are for sale, which also gives the signal to prices.

But he adds, "Today it is much easier to take loans and strangle yourself with mortgages and it is much easier realize the dream of a house and garden. I heard about homeowners who found the lockdown difficult in a small apartment and were looking for a house where they could go outside and work there several days a week. A house and garden is the best solution for such people looking for something bigger."

Gastfreund also agrees, especially on the impact of lockdown. "People spent more time at home over the past year and understand that it is more than just four walls but a place with very large significance and they are prepared to invest more to receive the comforts and more privacy that a house and garden allows. The children were at home a great dela and people imagine to themselves that if there were a garden and larger leisure area, the experience would have been less difficult for them.

In addition, people have more money. They didn't travel abroad and spent less in restaurants and saw what was going on around them and they are concerned that prices will go up even further. But that is true for all residential real estate, not only houses and gardens."

Either way the fact is that the price of land is going up, which would suggest that the prices of the houses and gardens, which will be built on the land, will also rise.

Published by Globes, Israel business news - en.globes.co.il - on July 8, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

House in Givat Ella Photo: Paul Orleib
House in Givat Ella Photo: Paul Orleib
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