So just a few days ago the Bank of Israel released a report for 2019. Although 2019 was...
❗So just a few days ago, the Bank of Israel released a report for 2019.❗
Although 2019 was without Corona, real estate investors can find relevant and interesting data. I have summarized some of them for you.
What was in 2019 in the field of real estate???
- Apartment prices rose by 3% during 2019.
- The significant increase was in the purchases of Yad 1 apartments (contractor). A total of 44,000 purchase transactions were made from a contractor. The highest number in the last decade!
- A total of 95,000 transactions were made in residential apartments in 2019.
- The average time to build an apartment at the end of 2018 was two and a half years, probably due to a change in the mix of buildings - the proportion of buildings with more than 11 floors has increased significantly in recent years.
- The report brings up a research figure that moving to areas where wages are high has a positive impact on children’s achievement.
- To take advantage of the density (concentration), in the last two years the number of housing units approved as part of construction evacuation plans has increased to try and reduce congestion on the roads (65% of the apartments were approved in the central area, most in two projects in Lod and Rehovot, 15% in Tel Aviv Central District, 10 % In the Southern District, 8% in the Jerusalem District).
- The validity of NPA 38 is about to expire in May 2020, subject to a transition period and will in any case expire in May 2025 in order to create other tools that will replace the NPA.
- The Urban Renewal Authority distributed a document in February 2020 in which an "appropriate" addition to an apartment area was defined as an addition of 12 square meters, as part of a construction evacuation project.
- The trend of real estate investments abroad in 2019 was on the rise. In the first three quarters of 2019, approximately $ 500 million was invested in overseas real estate. The volume of real estate investments abroad is about one-fifth of the volume of the decline in investment in apartments in Israel.
- The number of transactions in the central area is higher than in the periphery. However, there are no differences in trends. Until 2016 the number of transactions was stable and then decreased. The reason - the exit of many investors from the market due to an increase in the purchase tax in 2015 and the corresponding increase in the volume of apartments at a "renter's price". The most significant decrease in sales was to investors.
- Demographic change, and in particular the increase in the number of children, is pushing some households to move to larger apartments. However, in view of the rise in prices, fewer of them are moving to an apartment with a significantly higher value than its predecessor, and others are compromising on other characteristics of the apartment.
- The data on the change in average rent in 2019 do not indicate significant differences between central and peripheral areas.
- Price per occupant: The rate of apartments left without a winner in the periphery is significantly greater than their rate in the center (lower demand). Thus, "price per occupant" projects have been reduced in the last two years. Thus - the expansion of supply in the periphery created a satisfactory response to demand and therefore the rise in prices was halted and even excess supply was created.
- The housing needs plan in Israel dictates a construction target of 55,000 housing units in the years 2021-2025 and a gradual increase to 67,000 in the years 2036-2040. It will be clarified that in the years 2017-2019 the targets were met. In order to help meet the goals, the National Planning and Construction Council approved in 2019 the promotion of a TMA 35 amendment aimed at increasing the density in Israeli cities. In order not to harm the quality of life of citizens, infrastructure must of course be planned accordingly and jobs.
Long-term apartment prices: The stock of apartments is low in relation to demographic needs - a factor that supports the rise in apartment prices. On the other hand, apartments are overpriced compared to their prices, which are derived from the basic value - a factor that works to lower prices. It should be noted that the stock of apartments is also affected by the number of persons in each house. For the past four decades the number has ranged from 3.2 to 3.4 persons per housing unit.
- In the long run, there is a close relationship between the price of owned apartments, rental prices and market returns. Short-term increases in rent indicate an increase in demand for housing services in relation to supply.
In the last four decades, the rate of price increase in Israel has been about 2.8% in real terms.
So what will we have in 2020? Corona. Right. But what else?
It is difficult to predict because of the corona crisis (which is an objective crisis in the sense that there were no market demand problems) that came to us. The corona will pass or we will learn to live with it. Therefore, on the one hand, it appears from the report that for the past 40 years, real estate prices in Israel have been rising. However, beware of overpricing which will lead to a drop in prices. Other market factors that do not depend on us also affect housing prices - meeting the state's strategic goals in building apartments per year, increasing density and matching the quality of life in the city, apartment construction times that the state is making efforts to shorten, population growth and number of people per apartment.
The conclusion is that on a commercial and legal level, every transaction must be examined on a physical and macro level to examine the city's birth rate, environmental planning, infrastructure and long-term neighborhood goals.
Successfully!
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