There was already something in the air: contractors and marketers of new home have been reporting for weeks that the market has calmed down, building starts are at record levels (70,000 apartments are under construction), and the Ministry of Finance's new taxes on buyers of second and third apartments had cooled demand.
Now, there are new indications that the residential market is cooling - after a price rise of 40% in three years - even in asking prices on second-hand homes website Homeless, which fell in February for almost all kinds of apartments in all areas reviewed.
Asking prices for three-room apartments fell in nine of fifteen areas, asking prices for four-room apartments fell in eleven of fifteen areas, and asking prices for five-room apartments fell in eight of fourteen areas reviewed, excluding Acre and Nahariya, where there was insufficient data to conduct a reliable comparison.
Unexpectedly prices and demand rose in the Southern District, despite rocket fire from Gaza, which reached as far as Beersheva last month. The only area where prices and demand rose was in the southern coastal cities of Ashdod and Ashkelon. For the first time, asking prices for four-room apartments in Ashdod and Ashkelon crossed the psychological level of NIS 1 million, which might indicate a ceiling.
Rents also fell almost nationwide in February, belying concerns that rent will continue to rise, after rising 20% in the past three years, and close the gap in the rise of home prices, even if the latter begin to fall.
In view of the uniform drop in the home sales and rental markets (more or less), there was no major change in February in the table of returns for investors. The gross return on a five-room apartment was less than 3% in dormitory towns such as Kiryat Ono and Modi'in. In Beersheva, the city with the highest gross return, the return was 3.9%.
The highest returns were again for small apartments, especially in the periphery, where the risk of not finding a tenant is very high. The gross return on a three-room apartment in Beersheva can reach 5% at current prices, and the return in the north is 5.9% in Haifa and its environs and 7.4% in Acre and northwards.
A person seeking a reason for the cooling market can find one in the low return on rental apartments. In view of expectations that prices will stabilize (and the surge in prices of recent years will definitely not recur), investors are dreaming less about capital gains, and are mainly seeing unimpressive rental income.
Published by Globes [online], Israel business news - www.globes-online.com - on March 7, 2011
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