●
“The change we are seeing in the interest rate environment and the extreme price increase we have experienced in recent years, they say that 90% of real estate transactions are no longer correct. If a residential apartment in Israel yields 2%-3%, and the interest rate rises 5%-6%, this means that in most transactions what we will do is exchange money for money – but we will not make a profit.” A person who comes from the heart of real estate investments – Dvir Dimari – is responsible for this quote who established real estate investment funds in the last decade, and even published a book called “More real estate than intelligence” in which he shares the insights he gained from his experience in the field.
● The huge tender that will be closed in the ultra-orthodox city; And the draft law on settlements: what is expected this week in real estate?
● An expert in constitutional law warns: This is the future Israel is marching towards interview
We met him as part of “Money in the Wall”, Globes’ real estate investment podcast, in which he explained why, in his opinion, as of the beginning of 2023, for most “regular” investors, i.e. those looking for a conventional investment in a residential apartment in Israel, it is actually time to wait.
“A person who today has 700,000 shekels or 500,000 shekels in a checking account or some kind of bank account, and says ‘I’m waiting for an opportunity’ is doing the right thing. how do i know Because that’s what the big bodies do. They are sitting on cash today. Why? Because in today’s situation, of high interest rates, at least 20 thousand people in the country will not be able to meet the grandiose plan and commitments they took on a year or two ago and will want to sell – even if it is at a loss price, or at a cost price. They will be under pressure to close a deal within two weeks. In times like these there are opportunities.”
Dvir Dimari
personal: 39 years old, married + 6, lives in Efrat
professional: Entrepreneur and owner of “Dimari Investments”, an equity fund to initiate and improve real estate
Something else: Last year he published the book “More Real Estate than Intelligence” which deals with insights into the field and includes a guide for investors
Time to examine investment in special properties
Are you saying that it is better to wait with cash on the side and not make an investment, because you estimate that in six months to a year the prices would be lower?
“I don’t believe that prices have dropped dramatically. If an average apartment in Israel costs more than 2 million shekels today, we won’t wake up in two years and it will cost 1.8 million. I do believe that in this range, developers will suddenly offer 10 apartments here at a good price. Or people will offer good deals , because of ‘deadlines’ of mortgages and obligations that are no longer being met.”
For those who do wish to continue operating in the local market, even if while anticipating the opportunities he talks about, he recommends looking at some properties that he says are preferable at this time. One is the so-called special or rare properties.
“A special apartment can be a garden apartment, a penthouse or a detached house. For a detached house, I would be willing to sail to the outskirts as well because I see that the land resource no longer exists in Israel. And I will demonstrate. A few months ago one of the real estate companies (to which he is not related – c l) Advertised land for sale in the periphery for one million shekels. The one who got my attention was a company that consulted with me about a purchase. I told her that I don’t know the company or the project, but when I see the words ‘close to land’ and a million shekels I say go buy it. After two months, she came back to me and said it already costs NIS 1.6 million,” says Dimari. Another investment that Dimari sees as correct today is in apartments that have the potential to be included in the Pinoy Binui project.
There is potential in many places today, and on the other hand, many sellers today already include the “urban renewal premium” in the price, as if the project is already a fait accompli.
“That’s right. That’s why I wouldn’t go to a complex where tenants are already signing, because then the sellers are already pricing the properties far above their value. But if it’s a place you check and say to yourself, ‘Here it is, it hasn’t arrived yet,’ and I have many indications to say that it probably will So it’s something worth examining.”
Real estate investors will look for other avenues Eric Mirovsky, Commentary
The number of investors is getting smaller. We see a contraction of the rental market in terms of buying apartments for investment. Viability is decreasing and the government follows in the footsteps of its predecessors and continues to burden investors in terms of taxation.
Even for companies that turned to the field of long-term rental housing, the viability is decreasing. The interest rate is rising and they are calculating whether with a much higher interest rate than we were used to in the past, compared to the annual yield, it is worth entering this market.
Dvir says in an interview that there will be a certain drop in prices but not a collapse. Our experience shows that there is actually no control over the phenomenon of how much prices have fallen. We see that in Sweden, for example, apartment prices dropped by more than 15% in a few months. It may be that the prices have decreased calmly in Israel – especially when you take into account that so far they have not decreased. A lot depends on the Bank of Israel’s policy going forward, and a lot depends on the government’s policy regarding the housing industry.
On the way to decline or collapse?
A decline is probably expected, but whether we will slide into collapse or not – no one knows at the moment. Investors may find other avenues to invest in, not necessarily in real estate. In the real estate industry, this is the time to really look for special properties whose return will not come from the monthly rent, but from the increase in value.
Another issue is the continued decline in the number of real estate investors. You have to look at each transaction individually, but in general investors have no reason to stay in Israel today. The purchase tax has risen to a level of a financial magnitude that is equivalent to two or three years of current returns from renting the apartment, and we also do not see Dramatic price increases are on the horizon, as they have been in the last two years, and therefore investors are not expected to profit as in the past from the increase in the value of the property. What’s more, the increase in interest rates also erodes the returns. We are already seeing today that more investors prefer to sell properties, than buy apartments.
“Is it difficult for young couples? Nothing has changed”
At the beginning of his book, Dimari tells how his wife and he bought a 4-room apartment at the Amidar auction in Kiryat Arba shortly after the wedding for only NIS 60,000. To our question, does he think that today – after many years of price increases, certainly those we have seen in the last two years, and the interest rate that has soared – young couples can still dream of their own apartment?
“Even when we got married, they said it was no longer possible, and that the prices had already gone up, so there was no chance. I can tell you that a month ago I was sitting in a cafe in Jerusalem and I was asked about a project in Jerusalem in which someone won an apartment at a tenant’s price, and she made a much better deal than the 60,000 shekels I bought an apartment for In Kiryat Arba. She actually received a gift of one million shekels. So opportunities always exist. Once it was called an Amidar apartment and today it is called a price for a resident, a target price or an apartment at a discount.”
But today, even in Petah Tikva, it is difficult to find a two-room apartment for less than a million and a half shekels. This mainly means that you have to equip yourself with a very high equity in advance, long before you talk about mortgages.
“That’s true, but the big picture doesn’t change that much. When we got married, we dreamed of an apartment in Jerusalem that cost a million shekels at the time. For us, it was exactly like the situation you describe today in Petah Tikva. In every period, you have to examine the possibilities, and find the possible way for you, and there are such”.