Title: Apartment Prices Decrease as Real Estate Market Faces Significant Decline
Introduction:
The Israeli real estate market is experiencing a significant decline in transaction volumes, with a reduction of more than 40% in the past two years. While apartment prices have shown a decrease, it is not proportional to the severity of the overall market situation. This article explores the current state of the market, the impact on potential buyers, and the challenges faced by renters.
Decreasing Transaction Volumes Reflect Recession-like Pace:
The pace of transactions in the first half of this year mirrors the rate observed during the recession 20 years ago. The market has been impacted deeply, except for one district where real estate players have started to acknowledge the severity of the crisis. Although prices have slightly decreased, the decline is reminiscent of the stumbling in 2018 when the price per tenant reached its peak.
Obstacles for Apartment Buyers:
Young couples are finding it increasingly difficult to purchase apartments due to the rising prices and declining transaction volumes. The Housing Ministry’s new grant program, despite its intention to assist buyers, will only benefit around 4% of potential apartment buyers, according to the Chief Economist.
Rental Market Sends Warning Signals:
The rental market is signaling that those who disregard the price increases and hope that the situation will resolve itself are mistaken. The past three months have shown a rare occurrence of consecutive price declines, similar to previous years of economic unrest. However, the current real estate market is in a different position than before, and the decrease in apartment prices by only 3% annually does not reflect the magnitude of the ongoing crisis.
One District Pulls Down Apartment Prices:
The Tel Aviv district stands out as the main contributor to the decline in housing prices. The district housing price index recorded a 2.5% drop in two months, and there has been a notable decrease in transactions compared to the previous year. The high-tech bubble in recent years has caused rapid price increases in Tel Aviv, making apartments unaffordable for many potential buyers.
Potential Acceleration of Price Drops:
If the market situation continues to worsen, it is likely that the rate of price drops will accelerate. Developers and private apartment owners may face difficulties selling their properties at the intended prices, leading to a decision to pause sales procedures. Interestingly, apartments sold at residential prices have moderated the rate of decline in the new apartment price index, possibly due to increased promotions and incentives offered by real estate developers.
Rental Demand and Supply Imbalance:
Apartment renters are experiencing challenges as rental prices continue to rise, surpassing the increase in the consumer price index. The government’s approach of imposing high taxation on investors has led to their withdrawal from the rental market, resulting in a decrease in the supply of available apartments. Despite a 3.4% annual increase in rental properties, it is insufficient to meet the rising demand caused by a 30% increase in apartment prices in recent years.
Conclusion:
The Israeli real estate market is undergoing a significant decline in transaction volumes, indicating a deepening crisis. Despite a slight decrease in apartment prices, the severity of the situation is not fully reflected. Prospective buyers, particularly young couples, face challenges in purchasing apartments, while renters struggle with rising rental prices due to the imbalance between supply and demand. Urgent measures are required to address the crisis and create stability in the real estate market.