“Whether prices rise or fall, the ultra-orthodox will benefit”: senior officials in the real estate market summarize the year 2022 and give their predictions for 2023. So will prices rise or fall? What will be the effect of the interest rate increase on the market? What trends will change? And what will be the effect of the change of government on the real estate market? About that in the next article
May a year and its curses end, but will a year and its blessings really begin? Senior officials in the real estate market summarize the year 2022, mainly as a year of shortage in real estate with a crazy price increase, but some also see it as the year of change. So are prices on the way down? What will be the effect of the new government on the housing market? What other trends characterized 2022, and are expected to change in the coming year?
Former Chairman of the Real Estate Appraiser’s Bureau, real estate expert Ohad Danos: “The year 2022 will be remembered as the year of the recession in real estate. The year we realized that not every government change is a change for the better and that when there is a failure in a certain market, the free market policy (which is basically sit back and do nothing), does not work and can only help double-digit price increases. 2022 will also be remembered as the year of the interest rate – the year when the change began, and the increased interest rate is the one that will finally lower the prices. The year 2023, which has come to our favor, will already be the ‘year of the ultra-Orthodox’. Whether the prices go up or down, the ultra-Orthodox will benefit. A new city, grants by choice, and sectoral control. It seems that the new government has consciously decided not to internalize the mistakes of its predecessors. Once again, the real estate market is headed by a self-interested party, which will take care of its voters first and only then for the rest of us. And for that it was said, that God will help us.”
Chairman of the Union of Urban Engineers and Architects, and Modiin-Maccabim-Reot city engineer, Tzachi Katz: “After a year of instability, we hope that the new government will bring a series of clarity and a clear answer to the housing crisis and the challenges facing the country, especially in the field of infrastructure. It is the government’s duty to focus on solving barriers arising from a lack of infrastructure such as: public transportation, the addition and expansion of sewage treatment plants, the construction of electricity substations, and more. Today, the lack of infrastructure is an obstacle in the marketing of housing units in different regions of the country. In the past year, we experienced another year of upheaval following reforms and changes in the planning and construction law, and I call on the government to start and act on the legislation of a new planning and construction law, which fits the spirit of the times. In practice, in the field of planning and construction, the accreditation of independent committees has been stopped and the accreditation of previously accredited committees has not been renewed. As a result, the district committees are forced to engage in marginal programs, instead of facing the real challenges. The next government must see the manpower problem in the engineering departments of the local authorities, which actually serve as the “implementers of government policy” as a fundamental issue and reward them appropriately, in order to prevent the transfer of workers to the private sector and the loss of professional knowledge and experience. Also next year we will be accompanied by the theme of the ‘old buildings’, which some call it, unjustly, ‘dangerous buildings’. We must act on this matter and not wake up only when buildings collapse. The local authorities must be provided with tools, through legislation that will make the property owners inspect the building and maintain it on an ongoing basis. Require old buildings to submit to the municipality once every 3-5 years an engineer’s certificate on the stability of the building.”
CEO of the Asia Cyrus real estate developer, Avi Tam: “After a mistaken expectation that prices would drop, which led to a slight freeze in sales in the market, prices will continue to rise next year, in my estimation, but in a more moderate way. Despite the large amount of tenders issued by the state in the last year, the projects are still delayed due to a lack of manpower in the local committees and various conditions. There were quite a few tenders that we wanted to access and were rejected again and again and the number of apartments being marketed is still far from meeting the shortage. And there are many other problems – Rami’s tendering method (the highest bid wins) has not changed, the distortion that creates a target price plan and the prices of raw materials and construction that only go up. Bottom line – in Israel there is a great shortage of apartments and great demand, and unfortunately the halt in sales at the moment will only lead to a greater wave of demand, and further price increases in the coming year.”
CEO and owner of Iconex, Yotam Bar Hama: “The past year was characterized by tremendous growth in the real estate market due to innovation and the advantages of construction using the ICF method, and we personally at Iconex had a lot of extensive activity all over the country as a result. Today, I detect a rethinking of the public in regards to investments in real estate, both due to the recession and the increase in global interest rates, and also due to the increase in interest rates in Israel. Money is expensive, and there is more caution when it comes to investments. That’s why I think housing prices have peaked as of now, and even predict a price drop in 2023 in the luxury housing market. There will be pressure from the market, and in order to keep moving the train, the developers will have to lower prices, mainly of expensive apartments. In my opinion, at least in the short term, the change of government will have no effect on the real estate market.”
Chief Financial Officer at the real estate financing company Ruby Capital, Eran Heimer: “22 will be remembered as the year when interest returned to our world, after an entire generation of entrepreneurs and buyers who did not know what interest was. Today, looking back, we know that the zero interest rate is the strongest factor in the increase in real estate prices. Prices rose in every western country that grew and where the interest rate remained zero, and when the interest rate began to rise the prices in the global real estate market began to fall. Therefore, the year 22 will be remembered in my opinion as the turning point. In the first half there was a meteoric rise in housing prices and in the middle of the year, together with the increase in interest rates, the moderation in prices began. There is no good news for apartment buyers here because their real cost increases with the increase in the cost of financing. If in the last decade a return of 2.5% from renting an apartment for investment was a good alternative for maintaining the value of money – today there are no less good alternatives. Models of rental housing that were based on zero financing will crash when property owners have to pay high interest for 20 years. If a delay in the delivery of an apartment was until today a privilege of the contractor, today the interest for 6 months of delay will eat away the profitability of the project, and as in many industries the professionals will survive and the amateurs will not. At the same time, we are experiencing a flourishing of the non-bank real estate financing industry, as a result of the stoppage of real estate financing in the banking system.”
Head of the Roof Agreements Administration in Ashdod, Eyal Davidovitch: “In 2022, the very high price increases in land prices in Rami’s tenders continued, although towards the end of the year the increases moderated somewhat. In my opinion, this fact indicates that some entrepreneurs and contractors expect the price increase to moderate due to the interest rate which is expected to continue to rise. Despite the increase in land marketing in 2022, there is still a shortage of housing units and there are still many implementation barriers to plans that have already been approved, so I estimate that housing prices will rise in 2023 as well. However, in view of the increase in interest rates and the difficulty in raising funds, both on the part of the buyers and on the part of the contractors, I believe that the increase in prices will be very moderate.”