The property market in Israel

Azrieli Towers in Tel Aviv

Azrieli Towers in Tel Aviv

Here’s an interesting snippet of financial information about the Israeli property market from Globes:

“2015 is a year that Minister of Finance Moshe Kahlon will want to forget. Completely confounding Kahlon’s stated aim of cooling off the market, activity in the real estate sector reached the boiling point. A summary published today by the Bank of Israel as part of its 2015 annual report shows that proceeds from the sale of new apartments in Israel totaled NIS 64 billion in 2015, 60% more than in 2014.”

That’s some difference. No wonder the skyline was (and still is) bristling with cranes.

Here’s another comparison:

“Real estate taxes accounted for 28% of Israel’s total tax revenue in 2015, compared with just 5.4% in 2014.”

From 5.4% to 28%? Incredible.

On the ground, there is a continuing debate about the property bubble. Prices, in general, are high. And they show little sign of cooling. Will the bubble burst, and if so, when?

The people suffering the most are those starting out in life: young couples, newly marrieds, and others trying to get on to the property owning ladder.There are schemes offering reduced prices for local residents, who then are unable to sell for a certain period (5 years). It should be noted, however, that such schemes do not prohibit buy-to-let. So, I do wonder if that is actually ensuring the fizz stays in the property market. And I also have my suspicions about how many of these first time buyers are nominees for property dealers.

The bottom line: there does not seem to be an effective plan to take the heat out of the property market.

Read the whole Globes piece here.

Ra’anana land in demand

From Globes:

“After many years in which the Israel Land Authority (ILA) issued no tenders for high-density construction in Ra’anana, tenders were closed yesterday for the construction of 188 new housing units on four lots in the Neot Sadeh neighborhood in Ra’anana. Competition for each lot was intense, with an average of nine bids each.

An analysis of the entire tender shows that the average value of the land, including development costs, is NIS 827,000 per land per housing unit. Neot Sadeh is a new neighborhood in northern Ra’anana located near Weizmann St. and the industrial zone. ILA will receive over NIS 150 million from the winning bidders for the four plots just for the land.”

On these figures, and with a back of a fag packet calculation, that’s a base cost before construction of around 138,000 pounds (Sterling) per unit. Or about $213,000 (US). I dread to think what the sale prices are likely to be.

To put matters in perspective, there’s a three block development near to us in Ra’anana that completed about three months ago. By my reckoning, there has been an average of one owner moving in per month… that’s roughly three or four flats occupied out of sixty. The word is that the price rose too far, and people dropped out. However, there’s no sign of any concerted sales effort. For example, the sales office has gone. And yet, other developments continue, on top of which there is this release of new land.

Every so often, there’s talk of a property bubble. So far, each time it has been talked about, that is all that has happened. Just talk. Presumably the buyers (and developers) of the new land are optimistic that if there is a bubble, it will not burst. But that optimism, not to say belief, may be tested if the next set of housing developments to complete in Ra’anana, also lie largely empty for a while. Yes, there are incoming residents – mostly from France, the USA, and the UK – but quite a few of the newcomers are choosing to rent. I am told you cannot get a decent return on rented property at today’s prices, so the buy to rent market isn’t there just now. That would need prices to drop by at least 10-20%. Suffice it to say, we’ll be keeping an eye on things.