"The government's policy is raising prices, not lowering them. Instead of creating infrastructure for new construction, they are creating infrastructure for higher prices," RE/MAX Israel founder, owner, and CEO Bernard Raskin told journalists in summing up 2019. "If they don't build enough and don't create infrastructure, prices aren't going to fall," he said. The RE/MAX Israel chain's summary states that housing prices rose over the past year in most locations.
"The market in Israel is distorted, and price rises are continuing. Young people will pay more for housing, and higher rents before they buy," Raskin said. "The only way to solve this is to free the market and let it do its job. The people are also responsible for this, because we're impatient and want changes to be made now."
RE/MAX Israel's survey includes 9,000 deals by its franchise holders throughout Israel. Although the survey is unofficial and based on prices in deals, and the sample does not match the indices compiled by the Central Bureau of Statistics or other surveys, the trends it reports can serve as a crude estimate of events in the various local markets.
Raskin notes that prices rose in most cities, except for a number of places where demand is poor and there has been a great deal of construction, especially Ashkelon, Afula, and Dimona. "Wherever the Buyer Fixed Price Plan exists in central Israel, it is absorbed in the market's activity, and prices continue to rise. It has an effect mostly in places where demand is low, but if demand is low, why build there? Who wants to live there?" Raskin comments. Even in Nahariya, where there is intensive construction under the Buyer Fixed Price Plan, prices of deals have fallen by only a few percent.
The biggest surprise in the survey was in Harish, a city that features large-scale construction under the Buyer Fixed Price Plan and excess supply. According to the RE/MAX Israel survey, however, housing prices in the town rose, especially three-room apartments, the price of which went up almost 30% to NIS 900,000. The local RE/MAX Israel franchise holder believes that the reason lies in the city's rapid development, which enables new purchasers to see almost completely developed neighborhoods. Another explanation is that most of the apartments in the town have four or five rooms and are priced at over NIS 1 million, while there are relatively few three-room apartments.
Prices in Tel Aviv rose slightly, but remained fairly level. Prices of three-room apartments in the city center are around NIS 42,000 per square meter, and if the apartment includes an elevator and parking, the value jumps 25% to NIS 54,000 per square meter. What characterizes Tel Aviv, however, is mainly rents, which RE/MAX Israel says rose by 6%. Monthly rents for three-room apartments in the city center are NIS 6,800-8,500, depending on the apartment's quality.
In most Jerusalem neighborhoods, prices in deals closed in 2019 were a few percent higher than in comparable deals in 2018. Prices varied greatly in cities in the Sharon area. While prices in Herzliya remained steady and rose by a few percent in Netanya, prices in deals in Kfar Saba and Ra'anana rose by 7-10% last year.
Prices of four-room apartments in Modi'in fell by 5%, while prices of five-room apartments were up 4%, a difference attributed by RE/MAX Israel to a large supply of four-room apartments. The real drama in Modi'in lay in rents, which rose by 15-25%, depending on the apartment size. Raskin attributed the rise in rents to investors driven out of the market by the government, which he said reduced the supply of rental apartments.
"The CEO of RE/MAX in Greece told me that Israelis are going there to invest; they are a big factor there. Developers are starting to build for the Israelis. Instead of investors encouraging construction here, they are encouraging construction there," Raskin says, adding, "It's true that I have an interest in the matter, but we see what's happening."
Given the developments in 2019 and the current trend, RE/MAX Israel believes that prices will continue rising in 2020, and at a faster pace than in 2019.
Published by Globes, Israel business news - en.globes.co.il - on January 6, 2020
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