Indices Tel Aviv Real Estate andTel Aviv Construction Have fallen in the last three months by 11% and 12% respectively. The reasons for this are probably related to investors’ fears about the sharp rise in inflation and the effect of interest rate hikes by the Bank of Israel on the Israeli real estate market, with an emphasis on the residential construction sector.
However, data released in recent days residential construction entrepreneur Praszkowski, Teach that at the moment the global economic storm has not yet permeated the local housing market. The data show that in May 2022, Praszkowski sold 24 apartments for NIS 52.1 million before VAT.
This amount reflects an average price per apartment of NIS 2.17 million (before VAT), ie a total of NIS 2.53 million. Praszkowski sold 89 apartments in the first five months of 2022, for a total consideration of NIS 189 million.
In this way, May became the second strongest for the Praszkowski company in terms of the total consideration in the last 12 months, and the third strongest in terms of the number of apartments sold during that period. The company’s strongest month in the past year was December 2021, when 31 apartments were sold for NIS 63.4 million before VAT.
“People do not believe the market will stop”
Company Praszkowski Which is controlled The Praszkowski family, Is currently traded on the stock exchange at a value of NIS 2.5 billion, after its share has lost about 15% of its value in the last three months. However, over the past three years, the investment in it has yielded a dividend yield of 266%. The company ended 2021 with a net profit of NIS 354 million (an increase of almost 50% compared to the profit in 2020), and in the first quarter of 2022 presented a net profit of NIS 93 million – almost double the corresponding quarter last year.
According to the company’s chairman, Yossi Praszkowski, The good data presented by the company indicate that at the moment no change is felt in the market following all the recent economic events in Israel and around the world. “In the end, there is strong demand, because there is no supply. There are no apartments, and when there are no apartments and there are people who want to buy, then both demand is high and prices continue to rise. Nothing for people. “
But since the mortgage generally goes up – when the prime interest rate rose as a result of the Bank of Israel’s interest rate increase and made the variable component more expensive, the consumer price index rose to an annual rate of 4% and increased the indexed component, and the fixed interest rate also rose. And when, in addition, economists expect the Bank of Israel to continue raising interest rates, the question arises as to whether all of these have no effect on the market in the meantime.
According to Praszkowski, “No. People do not believe that the market will stop. Fact – pointing with their feet. The market is thirsty for apartments, and there are no apartments.”
So in your estimation, will we continue to see a strong market in the coming months as well?
Definitely yes. Until the market stabilizes itself in terms of supply versus demand, we will continue to see strong data, because there are no apartments. “When the government thaws more land and arranges more apartments in the market, then it will be easier.”
There is also a growing demand for long-term leases
Praszkowski currently markets five residential projects in Ramla, Haifa and Tel Aviv, with a total volume of 971 apartments. Of these, 825 apartments have been sold so far, for a total amount of NIS 1.37 billion.
In addition, the company is working on the construction of another 1,402 housing units in projects that have not yet begun marketing – in Ben Shemen, Gan Rashal (Herzliya), Beer Yaakov, Haifa and Ashdod. Construction of long-term rental apartment buildings, as well as maintenance and management of previously purchased rental housing complexes in the United States.
Among other things, the company is setting up a long-term rental project in the Neve Doron neighborhood in Ramla, as part of the government’s apartment for rent. According to the company, registration for the project stopped at the end of only one day, after the number of registrants reached 200 while the number of apartments in the project stands at only 60 apartments.
Long-term rental project, Praszkowski in West Ramla / Imaging: Iwaleb Media
Among the registrants, a lottery will be held in which it will be determined who will be allowed to rent an apartment in the project, and the apartments will be inhabited in October. According to Yossi Prashkovsky, “The demand for this area of long-term rent will continue to rise, because those who do not have the money to buy will continue to live in rent.”
Praszkowski notes that he cannot know what levels of interest rates and inflation will lead to a substantial change in the market trend. According to the Leader Capital Markets Investment House, inflation will reach 3.3% in the next 12 months (compared with 4% in the last 12 months), while the Bank of Israel’s interest rate will rise in the next 12 months to 2.5% (compared with 0.75% today). So that the prime interest rate will rise to 4% (compared to 2.25% today).
Meitav Investment House’s forecast is slightly different, talking about inflation of 3.6% in the next 12 months and the Bank of Israel interest rate reaching a level of 2% -2.25% in a year.