“You know,” economist and real estate appraiser Irit Lieberman opens the interview, “I’ve seen a lot of assessments by professionals, fellow travelers, but my opinion is different from theirs. And I want to make it clear at the outset – the main reason for the increase in prices in Israel is different from what they’ve said so far.” .
Lieberman previously managed the real estate department of the Tel Aviv-Yafo Municipality. Today she works in the field of appraisals, but also in municipal consulting and program promotion.
I’m curious.
“The answer is simple – the average annual growth rate of the population is a high rate of 2% per year. In the OECD countries it is negative or zero. The construction rate does not catch up with the birth rate in Israel. The demand for apartments exceeds the supply.”
And how does the interest rate affect?
“The current situation only makes it more difficult because on the one hand, the interest rate rose a lot so people stopped taking out mortgages. On the other hand, today, those who don’t have to sell don’t sell, those who have to sell – sell. There are spot price reductions, not a large amount, because people have committed and have to sell At the same time, the promoters insist on not lowering prices. They make special offers, but they are included in the price. They give you a year’s rent at their expense, or pay 20 percent at the signing and 80 percent at the end. I even found 10/90. Contractors previously objected to you selling the apartment that you bought during the construction. But today they allow it, even before the last payment. They want to make it easier for the buyers, and still – they don’t lower prices. Moreover, those who don’t have to build – don’t build.”
Where is the logic? There are financing costs.
“If they start building, the costs will increase. In the meantime, he financed the land, so now he will have construction expenses. There are some who are in combination deals, so it’s less terrible. But most of them do not know if they will be able to sell. Therefore, many stop construction starts. The decrease is only in the individuals who must sell In the long run there will be a jump.”
And maybe, we didn’t talk about it – mainly lack of supply.
“We do not compete for the supply. The only way is to thaw land. Rami and the state – their interest is financial. On the one hand they want to bring in as much money as possible, on the other hand more compromises are needed. This combination is difficult. The price drop should come from there. If the thawing of the land had been in a more social method and not in terms of price, it would have been successful. This discount should have been passed on to consumers. The way of the interest rate increase does not help, in our case – because of the very low supply and the hard demand. That’s how you don’t lower prices”
Those who read what you say are now thinking: why doesn’t she talk about decline? Does she not see that there is a slowdown in the market?
“Something like 15 years ago, there was a period when no offices were rented in Israel. Mainly in Tel Aviv, Beno and Beno, but the tenants didn’t come. People thought the prices would drop. It didn’t happen. People rented at 0 rent just to save on paying property taxes. All office construction froze. But what? The prices didn’t drop. Then the hi-tech bubble was created, they came and rented similar spaces. This is what will happen in residences as well. You can talk about a decrease, but it won’t happen.”
How will the hi-tech crisis really affect the office sector?
“This is also an interesting question, but I think the prices will not decrease. They are very high, but it will be static. I don’t see a jump there, because the high-tech situation will not improve excessively in the near future. But in residential areas – in the end, people need a place to live. There is a section Hybrid, today people work from home and don’t come to the office. On the other hand, the population is growing. People are getting older and a lot of people are getting divorced, so we need more housing, a house for every divorcee. What happened in offices will also happen in housing. Sorry to be a prophet of anger, but prices will not go down in Israel. I don’t She says ‘want to buy’, and you can sit and wait. But there won’t be a drop.”
And here is a question from a student in his first macro lesson. What will happen now to rental prices?
“I see a significant expected increase – first of all for the simple reason that they raised the rate of the tax exemption for apartment renters to NIS 5,470.”
come on. We both know what it will produce – less black money. and price increases by the apartment owners.
“It could very well be. But in the end – people who can afford this rate will go up. The interest rate went up, people bought for investment, the whole cost went up and they have to balance costs and return the money. How? In rents. Because of the increase in interest rates, I believe that the rents, certainly in the center of Tel Aviv , will go up. I see it in every contract renewal in Tel Aviv – another 5-10%. This will continue in light of the rise in interest rates.”
So interest increases – rent increases. Interest rate drops – the market returns to itself and again corrects upwards. The citizens are desperate.
“I am an economist by profession, and I agree with the view that it will decrease. It will not decrease in the coming year to what we saw in 2022, but we can already see that inflation is moderating, just as it happened last month. The Bank of Israel has achieved its goal. Some claim that we have reached the limit with the increases. For the last time We thought that the governor would increase by less, but it will happen next time. Maybe another quarter of a percent. Nothing significant.”
What will the new policy of Bibi-Smotrich, who want to reduce the property tax, do? After all, in the end, they give us property tax – but bite us with mortgages.
“Stopping the increase in property tax is not significant. Households have higher expenses such as electricity and mortgages. These are the biggest expenses in our lives. But what will happen? You get education and culture and street cleaning from the municipalities. On the one hand, this will not significantly benefit the households, on the other hand it can damage the services received from their authority. No one said they would subsidize property taxes. The authorities may be harmed.”
The mortgage takers who suffer an increase of, say, 1000 shekels per million shekels because of the prime – won’t they cause the market to correct a little lower because the repayment capacity will decrease?
“I don’t think it will stop, but it will cause something else. Starting in the near future, people will purchase apartments according to their abilities. People with a certain amount of equity, with a first apartment, until today could take with a certain amount of equity, give 25% of the apartment’s value, and more 75% in mortgage repayment. Then what did they do? They bought an apartment that was a bit expensive or too big for their size. In the current situation with this interest rate, people will understand that it is a bit heavy. They have to pay back NIS 2 million on a house of 3 million shekels, let’s say, and it might be difficult. The market will not stop , but they will buy more modest apartments.”
The periphery expanded.
“So instead of central Tel Aviv, they will go to East Tel Aviv, or Ramat Gan or Holon. They will find slightly cheaper apartments, in a location they would least like. What is important is that they can afford it.”