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Appraisers: Home prices still rising

 15.3.17

"Buyer fixed price deals distorted the housing prices published by the Central Bureau of Statistics."

 

The Real Estate Appraisers Association in Israel today published its quarterly survey of housing prices for the second time. The survey covers prices of new and secondhand four-room apartments in a number of selected cities in Israel. The Ministry of Justice chief government appraiser formerly published the quarterly survey, but several months ago, the cabinet decided that the Central Bureau of Statistics would be exclusively responsible for publishing housing prices data in Israel.

 

As a result, the government chief appraiser stopped publishing a survey. The order given to the government appraiser to stop publishing data aroused great opposition, including among land appraisers, and the Appraisers Association decided to publish the survey itself, using the same methodology, and even the same graphic structure.

According to the Appraisers Association survey, housing prices continued rising in the fourth quarter of 2016, in contrast to the Central Bureau of Statistics' recent report showing a 1.2% decline in the housing prices index. While the two surveys both address changes in housing prices, they use different methodologies and databases.

The Central Bureau of Statistics database used in its survey is broader, encompassing dozens of communities, compared with the Appraisers Association survey, which is confined to only 16 cities. Another difference stressed by the Appraisers Association in the survey published today is that the Central Bureau of Statistics index does not exclude buyer fixed price deals, which the Appraisers Association says may have resulted in the figure showing a decline in prices.

"The Central Bureau of Statistics is misleading the public"

In the framework of its survey, the Appraisers Association cites a location in which the sale of apartments under the government program for cheap apartments strongly affects the general price in the statistics. "The importance of this index can be understood from the case of Rishon Lezion, where buyer fixed price deals reported in December 2016 accounted for 25% of all deals conducted in the quarter," the survey stated.

"When buyer fixed price deals were excluded, a 1% rise in comparison with the preceding quarter was demonstrated in the primary market. When they are not excluded, a 6% ostensible decline was shown in Rishon Lezion. While prices in the primary market are still rising, a faulty index including prices in the buyer fixed price plan will ostensibly show a dramatic fall in prices. This is probably the explanation for the index published by the Central Bureau of Statistics showing an alleged fall in prices in December 2016, which apparently included some of the buyer fixed price deals."

Commenting on today's publication of the survey, Appraisers Association chairman Ohad Danos said, "When the Central Bureau of Statistics publishes an index showing a fall in housing prices in December, it is simply misleading most of the public. The Central Bureau of Statistics is starting to lose its credibility, which makes the Appraisers Association's housing prices report even more important."

 

A 1.7% quarterly rise

The Appraisers Association report shows that prices continued to rise in the fourth quarter of 2016. These prices are solely for new and secondhand four-room apartments in 16 cities. According to the figures, fourth quarter prices in the surveyed cities were 1.7% higher than in the third quarter.

The quarterly increase reached 4% in Holon and Ashkelon, 3% in Netanya and Kfar Saba, and 2% in Ashdod, Modi'in, Ramle, and Tel Aviv. The increase in prices was only 1% in Beer Sheva, Jerusalem, Petah Tikva, Rishon Lezion, and Rehovot. Average housing prices in Haifa, Herzliya, and Eilat in the fourth quarter of 2016 were the same as in the preceding quarter.

The Appraisers Association survey also addressed the yearly changes in housing prices, in other words, a comparison of prices in the fourth quarter of 2016 with the fourth quarter of 2015. This comparison showed an 8.3% increase in housing prices, with the highest rise being 13% in Tel Aviv and the lowest 2% in Haifa.

Another interesting and important point about the Appraisers Association survey is the standard deviation of the data. While the price stated in the survey refers to the average price of a four-room apartment in a specific city, the variance within the cities is very large, meaning that the figure reflects only the broad average. The standard deviation for each community in the survey shows the extent to which prices differed within that city.

For example, the standard deviation was a huge 30% in Tel Aviv and over 20% in Netanya and Jerusalem. These deviations make possible a situation in which the price is falling in certain neighborhoods, while rising in others, and the general average shows in increase in price.

Published by Globes, February 20,2017

 

 

Israeli realtors urging sellers to close deals fast

 15.3.17

Realtors in Jerusalem and Beersheva insist that apartment prices are falling. 

 

"There is a drastic fall in deals, and people are lowering prices substantially, even by NIS 150,000. What is the state of the market today? It's catastrophic. The market just isn't what it was two or three years ago. I see real estate brokerages collapsing," says Shimon Shaul, owner of the Shaul real estate brokerage in Beersheva, who has been operating in the city for six years, and also brokers deals in Omer, Meitar, and Lehavim.

 

"I'm telling people there will be a drastic downturn. People have been unable to sell homes and apartments for six months. We have clients who wanted to sell at NIS 2 million. I told them they should go down to NIS 1.92 million, and they didn't listen to me. Now they have lowered their price to NIS 1.9 million. I'm not inventing this; it's the state of the market. In my opinion, everything points to a downtrend," Shaul adds.

In his brokerage's ads, Shaul recently wrote, "Before the expected fall in prices… Now is the time to sell!"

Shaul's ad, which was published before last week's Central of Statistics data showing a 1.2% fall in housing prices in December 2016, is not the only one.

Shaul says, "Up until recently, whenever we would try to find someone to talk about a bubble in residential real estate prices and a possible bursting of the bubble, all we heard from interested parties in the capital market was mainly things like, 'a lack of supply' and 'prices are only going up' - declarations that are often obviously designed to attract buyers, who won't buy a home if they're told that the price will be cheaper tomorrow."

Recently, however, it appears that the situation is starting to change, including what people are saying. Here and there, you can see reports by realtors who are starting to change their tune. Slogans like "Buy now, because the price will go up tomorrow" and "There aren't enough apartments, and prices won't stop rising" are being replaced by expectations of lower prices.

At the same time, some say that the warning ads beginning to surface are nothing more than a new selling technique by some realtors, who are having a hard time finding deals, and who are trying to induce homeowners to sell. In any case, there have been signs recently that the market trend is changing.

A few weeks ago, "Globes" revealed that real estate prices in Ra'anana were going down. Several weeks before that, in a different story, "Globes" reported things had changed in Beer Sheva, too, and investors were no longer buying apartments at the same rapid pace as in previous years.

The small number of deals in the sector is reflected in reports by the Ministry of Finance chief economist in recent months, together with figures showing a drop in the proportion of purchases by investors. The Ministry of Finance is boasting that the fall in purchases by investors was caused by its measures. It is premature to conclude that a long-term change in trend is in progress, but these indicators, data from both the Ministry of Finance and realtors, must not be ignored.

"They're asking me to reduce the price by NIS 50,000"

The Ministry of Finance figures showing a decline in purchases by investors fail to impress Shaul. He says the story is much more complicated: "It's not because of the investors. I ask an unfortunate couple in town seeking to buy a home who are NIS 30,000 short how much their salary went up in recent years. It's usually a few hundred shekels, if at all, while at the same time, housing prices spurted by hundreds of thousands of shekels. People just can't get the money.

"People are doing anything to sell. My clients call me and ask me, 'Why did my neighbor sell his home within a few days, while I haven't been able to do it in several months'

"The problem is that the prices are insane. I've been working in this sector for six years, and I never guessed that prices would reach such levels. An apartment I sold for NIS 400,000 is now being sold for NIS 1.2 million. No one's salary has gone up like that."

Another eye-catching advertisement presaging a drop in prices comes from a brokerage in the Jerusalem and Maalei Adumim area. "2017 started with a bang. I think that the trend is towards lower prices," explains Dani Serrero, owner of Imodan Real Estate, which also handles Jerusalem neighborhoods such as Pisgat Zeev, Ramot, Har Homa, and Tel Zion.

"I have 13 agents. I feel that the market is on a downturn right now. People are lowering prices, including in Jerusalem. Demand has come to a standstill during the past three or four months. Things have come to a halt, and secondhand housing sales are down, too. In my opinion, the trend will gain momentum. There are a number of deals now by people who have realized what's happening, and who are hurrying to close deals."

We also asked Serrero whether the sellers were mainly investors, or whether a broader trend is involved, and the answer again involves buyers who simply cannot afford the prices. "We've reached the price ceiling. Once upon a time, you needed only 10% equity, and the rest would come from monthly payments. Then they restricted financing, the prices went on going up, and young couples needed help from their parents. Now, even the parents can't help. They come with NIS 500,000, and it's not enough. The mortgage interest rates have started to rise. The banks are already asking for and taking 5% interest on mortgages. There's disappointment that prices went on going up. It has all led to this.

"Demand has come to a halt. Some people think the market will be flooded, and some think that Trump will approve large-scale construction beyond the Green Line, and that supply will grow. I see that prices are already falling. They're asking me to take NIS 50,000 off the price of homes. They (the government) have also harmed the investors, who can neither sell nor buy. They (the government) damaged the market irreversibly. The investors provided a solution for young couples unable to buy an apartment. The ones I think will benefit are people looking for better housing than they have, who will now be able to find deals and buy in a declining market."

We would not have heard these things a year ago. All the indices published then show that prices were still going up, and that was the attitude in the market. Now the trend may be reversing.

"No wave of selling by investors"

As expected, however, not all the realtors believe that the market has changed direction, and that the buyers now have the upper hand. Many believe that prices are still going up, and that the trend is not changing. Even they, however, admit that where investors are concerned, things have changed.

Maor Bar Tikva, a broker at RE/MAX Power in Petah Tikva, wrote in a recently prepared advertisement, "The Ministry of Finance and the Bank of Israel recently made decisions that will probably cause a slowdown in housing prices and a change in the real estate market." This is not exactly something that encourages Israelis to buy, but it could make sellers want to sell quickly.

Bar Tikva explained to "Globes" that he does not yet believe that the market is in a slowdown, but "My advertisement talks about thinking and preparing for a drop in price. I presented the feasibility and all the scenarios for a fall in prices, but I don't know when it will happen. Despite what the minister of finance says, and even though they have been talking about the small number of deals in recent months, we're not seeing it. I made five deals in January, and that's not a small number."

Bar Tikva explains that uncertainty is prevailing in the market, especially among investors. "I can say that the market is confused. The buyers are very confused, including because the mortgage interest rate has risen. People don't know what to do.

"The story with the investors is completely different. We feel a change. After the purchase tax was raised to at least 8% (in July 2015), the shortening of the period during which people can own two apartments and still receive a tax benefit, and the tax imposed on a third housing unit, the volume of investors fell steeply. You can really feel it. On the other hand, I can't say that that there is a wave of sales by investors. Investors realize that they will have to sell their apartment, and they're searching much less for an apartment to buy. I think that all the measures taken have had an effect, and it's going to continue."

Published by Globes February 20, 2017

 

 

 

New home purchases continue falling

  15.3.17

Home purchases in Israel totaled 9,700 in January, 5% fewer than in the previous month. There were 9,700 home purchases in Israel in January 2017, 5% fewer than in the previous month, according to the survey of the chief economist in the Ministry of Finance released today. In comparison with January 2016, the figure represents a 3% rise in home purchases. According to the survey, a rise in sales by those holding investment properties offset a continuing sharp decline in purchases of new homes.

The decline in purchases of new homes encompasses all market segments, with young couples waiting for "buyer price" projects. Heavier taxation of those buying homes for investment has also had its effect.

The district with the sharpest decline in purchases is Rehovot. In this district, sales in "buyer price" projects, in which developers bid for land on the basis of the lowest price of the apartments to be constructed, began in the third quarter of last year (mainly in Rishon LeZion). Just 240 new homes were sold in this district in January this year, 45% fewer than in the previous month and in January 2016.

The proportion of investors in apartment transactions in January remained low, at 17%. Investors bought a total of 1,600 homes that month, 2% fewer than in the previous month and 18% fewer than in January 2016. Sales by investors rose 25% in January 2017 in comparison with December 2016, amounting to some 3,000 apartments.

The decline in purchases by investors is mostly in the new home segment (down 30% in comparison with January 2016 and 18% in comparison with December 2016). This may be a manifestation of the effect of the multi-home tax, which is 1% of the value of the home.

Published by Globes March 12, 2017

 

 

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Foreign residents Israel home purchases down 31%

15.3.17

The sharpest fall was in Jerusalem where home purchases by foreign residents fell by 41% in 2016.

Home purchases in Israel by foreign residents fell to 2,241 homes in 2016, down 31% from 2015, according to figures provided by the Ministry of Finance. The sharpest fall was in Jerusalem where home purchases by foreign residents fell by 41% with a 25% fall in the Tel Aviv and Netanya regions.

The fall in home purchases in Israel by foreign residents was far sharper than in the entire market and means that only 2% of homes now purchased in Israel are bought by foreign residents.

The sharp fall was due not only to Minister of Finance Moshe Kahlon's actions, including raising the purchase tax from 5% to 8-10% on luxury apartments, in addition to the elimination of the exemption from betterment tax that took effect in 2014, but also the strengthening of the shekel, making it more expensive for foreign residents to buy homes.

In Jerusalem, only two luxury apartments (over NIS 10 million) were bought by foreign residents in 2016, down from 12 in 2015.

 

Published by Globes  March 12, 2017

 


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