The average amount that the public is prepared to invest in an apartment fell by 7-8% in early 2009 compared with the second half of 2008, according to a study by Geocartography Knowledge CEO Dr. Rina Degani, which "Globes" has obtained.
Degani said, "Only someone who has to, buys an apartment today." She added that apartment prices are usually determined by the balance between people seeking upgrades, young couples, and people buying apartments as an investment. "When the proportion of young couples and people buying apartments as an investment is high, the amount people are willing to invest in an apartment declines. When there are more people seeking upgrades, the average price people are willing to invest in an apartment rises," she added.
The Geocartography study finds that the main change in the present market is in demand for apartments for investment. Purchases of apartments for investment currently accounts for 8-9% of all transactions, compared with 5.2% in 2008. Even during the height of the housing boom in the early 1990s, purchases of apartments for investment accounted for only 7% of all transactions.
Degani said, "The increase in demand for apartments for investment is naturally driven by disappointment with the capital market. We're talking about people over the age of 45 and high income-earners. There are also middle-class buyers who have been seeking real estate investments in recent weeks, and their entry into the market may boost demand for apartments for investment."
Despite comments by contractors, demand for apartments will likely fall sharply in 2009. The Geocartography study found that housing demand in May will be similar to demand in the last two months. This means that if demand in the coming months stays steady, there will be fewer than 80,000 transactions this year, 19% fewer than the 98,300 deals in 2007 and 15% fewer than the 93,700 deals in 2008.
The low housing demand is back at the level of 2004. The drop in demand is mainly driven by fence-sitting and lower demand by foreign residents. Foreign residents bought nearly 5,000 apartments in 2007 and about 2,000 in 2008.
Published by Globes [online], Israel business news - www.globes-online.com - on May 7, 2009
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