Part one of a two-part series: The sharp drop in home purchases with its consequent increase in supply, coupled with the slowing pace of the increase in home prices, all seem to suggest that the market has entered a wait-and-see pattern.
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In the days when Hamlet was first staged, borrowing was an epidemic among the gentry of London to the point where they were selling off their estates piece by piece, in order to maintain their ostentatious lifestyle. Old Polonius thus feels compelled to counsel his impulsive son Laerteswith the now oft-quoted words:
“Neither a borrower nor a lender be.”
By the same token, one might argue that what was up until recently perceived to be a potential real estate bubble in Israel’s residential market has ever-so-quickly evolved into a situation of: “Neither a buyer nor a seller be.”
On the one hand, Israel’s economy is expected to grow by five percent in 2011, compared with 4.8 percent in 2010, according to recent predictions by the Central Bureau of Statistics (CBS).This would put Israel’s growth rate for this year at more than double the average growth rate of 2.3 percent in the Organization for Economic Co-operation and Development (OECD). The CBS likewise predicts a 13 percent growth in private consumption per capita of durable goods (vehicles, furniture, and appliances), which are considered an excellent barometer of the country's standard of living.
On the other hand, the Mishkan Hapoalim Mortgage Bank Homebuyers Index fell a further 0.3 percent in August 2011 to 125.4 points, its lowest level since June 2003, indicating that the condition of homebuyers continues to worsen due to rising home prices and interest rates. The housing inventory totaled 17,600 homes in August—16 percent more than in August 2010. Real Estate professionals seem to agree that this “sit-on-the-fence” scenario is primarily the result of the nation-wide public demonstrations held over this past summer.
While home prices have risen 64.8 percent in nominal terms since the low point of 2007, the Ministry of Finance reports that the median home price fell to NIS 960,000 in July, 1.1 percent less than in June and 11 percent less than in July 2010. The sharp drop in home purchases with its consequent increase in supply, coupled with the slowing pace of the increase in prices, all seem to suggest that the market has entered a wait-and-see pattern.
Real Estate professionals seem to agree that this “sit-on-the-fence” scenario is primarily the result of the nation-wide public demonstrations held over this past summer.
“Nationally, the volume of transactions is down by around 30 percent,” comments Ilan Rubinstein, CEO of ILAN- Israel Lease & Acquisition Network, “though it is noteworthy that certain areas remain unaffected or are even higher.”
The demonstrations, which began as a consumer boycott of cottage cheese (compelling leading producers of the popular dairy staple to slash prices), quickly gained momentum in July when social activists set up tent cities in Tel Aviv to highlight the high cost of real estate in the city.A poll published by Haaretz at the time indicated the housing protest was supported by 87 percent of the Israeli people, resulting in a sharp decline in public approval of the Netanyahu government to only 32 percent from 51 percent two months prior to the first mass protests.
A committee headed by Professor Manuel Trachtenberg was immediately appointed by the government to figure out ways to lower the cost of living for Israel’s rising middle-class, and to especially address the severe housing shortage.
Submitted just prior to the Jewish New Year, the report calls for the approval of 196,000 new housing units nationwide within the next five years with 20 percent of the homes earmarked as “affordable housing.” This is in response to the growing trend of luxury housing which appears to be targeting both the wealthy and investors from abroad, at the expense of average Israelis.
“The Trachtenberg proposals may have been approved at cabinet level,” Rubinstein demurs, “but they face an arduous legislative process before they can be adopted.”
Rafi Lisker, a veteran oleh (Israeli immigrant) originally from Queens, NY, is a contributing writer for JointMedia News Service. He has lived in Israel for over 20 years, and can be reached via email: firstname.lastname@example.org
Ilan Rubinstein is founder and CEO of ILAN– the Israel Lease & Acquisition Network, a leading Real Estate Agency specializing in rentals, sales and property management of both new and existing properties throughout Israel's major cities. Mr. Rubinstein can be reached via email: email@example.com