A Broker’s View of the Market – February 2012

We’ve all seen the number of headlines, sometimes conflicting, regarding the Israeli property market over the past few years. At times, it’s cited as one of the world’s hottest markets, yet with prices rising over 67% since May 2007, and 12% since August 2010, there are many detractors as well, citing the imminent approach of a bubble burst.

It appears that these headlines have begun to take a toll on the market, with this past December, generally a busy time with with foreigners looking to buy and Israelis looking to move in time for the summer, being quite a quiet month. Where in December of 2010 Israel saw 8,466 sales , only a year later the holiday season produced 7,861 sales, a reduction of 7.7%. Despite the drop in volume, however, prices were 7.5% higher than in 2010.

To what do we owe this slowdown? A number of reasons that I can cite are the increase in interest rates, the banks’ continued restrictions on lending, the social protests throughout the country, and the political situation. While many see the political situation getting better, with the release of Gilad Shalit and increased diplomatic talks between Israel and the Palestinians, many also see the Iranian factor as a detriment. It’s really a mixed bag as far as the political situation goes, with those living here being less affected by it, as can be expected, while there is a correlation between foreigners’ purchasing here and the status of the political situation. In this broker’s estimation, it really makes no difference at all to those who live here and plan on staying – if you live here, you still need to buy, no matter what the region’s politics dictate.

Despite all of this, however, the banks are still not being as generous with lending as once before. Many who had been looking to purchase their homes have turned to the rental market, which has skyrocketed over the past year, despite the wide spread protests against housing prices this summer. Where the average three bedroom apartment in Central Tel Aviv could be rented for 6,500 – 7,000 NIS in 2010, the average price has now climbed to 7,500 – 8,500 NIS. Three bedroom apartments with a balcony, parking, and and elevator, in the city’s trendiest neighborhoods of Lev Hair and Neve Tzedek have been rented out over the last month for 12,000 NIS and 15,000 NIS respectively. One bedroom apartments will cost the renter even more, with average prices exceeding 5,000 NIS. Young couples, students, and roommates looking for apartments under 5,000 NIS report it taking over a month to find the ideal place, in most cases with the help of a real estate broker, a practice previously unheard of for apartments in this price range. Where renters used to be able to evaluate their options, decisions must often be made at the same moment as seeing the apartment, due to the extensive competition. To be sure, renting an apartment is not an easy task here in Tel Aviv.

For those in the market to purchase an apartment, the protests and economic situation have not produced the results many hoped for, with prices remaining relatively stable.  Buyers have remained quiet, preferring to wait to see what the market will yield, which accounts for the lack in sales volumes throughout the country over the summer. The lack of demand spurred some great values to be released to the market by motivated sellers trying to jump ship, with these under priced assets accounting for many of the sales that did occur over the past few months. A new 180 sm garden apartment in the up and coming neighborhood of Kerem haTeimanim sold for under 21,000 NIS per square meter, significantly below the 30,000 NIS per square meter average that the neighborhood typically commands. On the other end of the spectrum, a highly desirable small one bedroom apartment near the sea in the Old North neighborhood was sold for 40,000 NIS per square meter, just showing that for those who find their perfect home, the market conditions and political situation remain a decidely non factor.

With spring approaching, and a (G-d willing) improved social and political situation in the country, the real estate market may indeed continue to improve more over the next few months. As both buyers and sellers continue to gain confidence in the market, prices will stabilize, bringing back both the demand of years past, and the needed supply of apartments to make their dreams come true.

Mati Bortnick is a principal of the Maki Group, a real estate brokerage based in Tel Aviv, where he has been advising clients, brokering property, and organizing buying groups in Israel since 2008. Mati has been featured on HGTV’s House Hunters International, the Jewish Daily Forward , the Jew and the Carrot, The Israel Times & The Jerusalem Post. Visit the Maki Group at: http://www.telavivbroker.com/

A version of this article appeared in the Times of Israel: http://blogs.timesofisrael.com/tel-aviv-property-market-report-february-2012/