"The stagnation in the real estate market continued, and even worsened, in September…September ended one of the weakest quarter in the real estate market since the period of waiting for the 0% VAT plan in 2014," Ministry of Finance chief economist wrote at the beginning of his survey of the residential real estate market. The volume of deals has been on a downtrend for many months in both new and secondhand homes. 7,300 homes were sold in September, 26% fewer than in the corresponding month last year. The figures show that many purchasers of their first homes, potential investors, and also those seeking better housing are sitting on the fence at the moment. New figures obtained by "Globes" indicate the extent to which the slowdown in home purchases is affecting those trying to sell a housing unit in Israel today.
More time, more money
Figures compiled by the Yad2 website for "Globes" show at as expected, the stagnation in the sector is significantly lengthening the period of time it takes for homeowners to sell their home. Yad2 figures for the length of a notice on the website in Israel's 10 largest cities show a significant increase for almost all sizes of homes examined (three, four, and five rooms). The figures were checked for the following cities: Ashdod, Beer Sheva, Holon, Haifa, Jerusalem, Netanya, Petah Tikva, Rishon Lezion, Ramat Gan, and Tel Aviv. Yad2 VP marketing and product Gal Ofarim says, "In most cities checked, we see increases in the length of time that a notice is published in the table. For example, the length of time it took to sell a four-room apartment in Haifa rose 35%, and it took 50% longer to sell a five-room apartment in Tel Aviv.
"The conclusion is that homes are still being sold, but it simply takes more time than it did last year. Incidentally, after all this, no significant decreases in prices are visible as a result of the prolonged wait. On the contrary; prices continue to rise, even if moderately. We conclude from this that the market is still active, and the government's plans have not yet achieved their objective." The Central Bureau of Statistics also says that prices rose 0.4% in September, and have climbed by over 15% since Moshe Kahlon became minister of finance.
The examination of notices on the board included a comparison the average time of notices on the website in the entire city, according to size of the home, in the third quarter of 2017 and the third quarter of 2016. The findings show that in some of the cities, the length that a notice stayed on the website increased substantially, and by 50% or more in some cases.
The figures show that the most significant change in three-room housing units was in Jerusalem and Haifa, where the length of time it took to sell a home increased by 24% and 29%, respectively. The increase was 16% in both Tel Aviv and Petah Tikva, 15% in Beer Sheva, and 12% in Netanya.
In some cities, the time needed to sell a home even shortened. The average duration of a notice fell by 16% in Rishon Lezion, 11% in Ramat Gan, 7% in Holon, and 4% in Ashdod. Small apartments have a lower price, and demand is relative inelastic, even among investors.
The picture is much clearer for four-room apartments. In all the cities examined, the length of time of a notice on the website clearly rose. The outstanding example was Beer Sheva, where the length of time of announcements on the website rose from 30 days in the third quarter of 2016 to 45 days in the third quarter of this year, a 50% increase. The increase was 39% in Ashdod, 35% in Haifa, 28% in Netanya, and 22% in Tel Aviv.
The length of time a notice stayed on the website also rose in the other cities, although more moderately: 11% in Holon, 6% in Rishon Lezion, 5% in Petah Tikva and Ramat Gan, and 4% in Jerusalem. Since four-room apartments are the most common, and are the most in demand among those seeking to improve their housing, who are the dominant part of the market, this figure is significant, indicating that the extent of uncertainty in the sector and the effect of the buyer fixed price plan on demand for housing on the free market are influencing the sale of homes. To the extent that those buying their first home are waiting for buyer fixed price lotteries, or have already won the right to buy an apartment, they are no longer potential home buyers on the free market, and it is taking the sellers longer to sell their home.
From 30 to 51 days in Ashdod
The situation with five-room apartments is similar. The figures show that the most substantial change in the length of time that an announcement remained on the website was in Ashdod, from an average of 30 days in the third quarter of 2016 to 51 days in the third quarter of 2017, a 70% increase. There was also a significant increase in Tel Aviv, from an average of 36 days in the third quarter of last year to 54 days in the third quarter of this year, a 50% rise. Increases in notice times were also substantial in six other cities: Ramat Gan (32%), Beer Sheva (29%), Netanya (22%), Petah Tikva (16%), Haifa (10%), and Rishon Lezion (9%).
The average length of time a notice remained on the board fell in only two cities: Holon (a 3% decrease) and Jerusalem (a 2% decrease). In this case also, it can be seen how the cooling off of buying is taking place in almost all of the cities. Five-room apartments are usually meant for those improving their housing. When they want to sell their apartments, they have difficulty buying a new one, which increases the length of time needed to sell large apartments.
There is no certainty that the home was sold after the notice is taken off the board. It cannot be ruled out that there are also sellers who prefer to remove their notice and wait until the trend reverses.
Prices are inching up, but rent is falling
In recent months, the market has been concerned about rents. Since investors are selling more than they are buying (a fall in the "inventory" of homes for rent), and quite a few home buyers will receive their homes only years later, upward pressure on rents should have accumulated, even if the sale prices of homes fell.
In practice, while housing prices are climbing, an examination of asked-for rents in the 10 cities shows that at least the asking prices are starting to fall. We asked Yad2 to check 11 cities outside the safe anchors of Tel Aviv and Jerusalem: Harish, Rosh HaAyin, Nahariya, Afula, Herzliya, Holon, Kfar Saba, Modi'in, Hod Hasharon, Petah Tikva, and Rehovot. We again emphasize that these are asking prices on Yad2 notices, not the prices at which the deals were actually closed, but the decline in asking prices definitely indicates an important picture. It is also important to note that among the cities we wanted to check were places in which many investors bought homes in recent years, such as Rosh HaAyin and Harish, which is now causing, or will cause later, a large supply of rental housing.
At the same time, we also sought to check what is happening in Afula and Nahariya, cities in the outlying areas, which are being affected by plans for construction of new homes. The third quarter of 2017 was compared with the preceding quarter and the third quarter of 2016.
The results show that while a mixed trend asking rents for three and four-room apartments is visible, rents for five-room apartments are clearly declining.
Of the 11 cities checked, eight showed a decline in the asking rent for five-room apartments in comparison with the preceding quarter, while only three showed an increase. According to the figures, the most substantial decline in in the asking rent in the third quarter of 2017, compared with the preceding quarter, was from NIS 4,000 a month to NIS 3,455 a month in Nahariya, a 14% drop. In second place was Afula, where the average asking rent fell from NIS 3,182 a month to NIS 2,824, a 11% decrease.
Other cities with a decline in the asking rent, compared with the preceding quarter, were Kfar Saba and Harish (4), Hod Sharon (3%), Petah Tikva and Herzliya (2%) and Holon (1%). In Hod Hasharon and Harish, the asking rents were also lower than in the corresponding quarter last year. The cities with increases in asking rents, in comparison with the preceding quarter were Rosh HaAyin (13%), Modi'in (7%), and Rehovot (2%). In Rehovot and Rosh HaAyin, asking rents also rose in comparison with the corresponding quarter last year, while this comparison for Modi'in showed a decline.
The trend in four-room apartments is more mixed. The most prominent figures for four-room apartments was in Modi'in, where asking rents were lower than in both the preceding quarter and the corresponding quarter last year. A similar mixed trend is evident in three-room apartments. The city with the most pronounced decrease in asking rents, compared with the preceding quarter, was Afula, where rents were down 3%, It is interesting to note that no fall in rent is visible in Harish and Kfar Saba in any size of apartment when the third quarter of 2017 is compared with the preceding quarter.
Published by Globes [online], Israel Business News - www.globes-online.com - on November 26, 2017
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