The tenth biannual survey by "Globes" and Bauman-Ber-Rivnay Saatchi and Saatchi unit Azimuth Advertising, together with Mutagim Research Ltd. has found that Israelis have reached the limit of their financial capacity to pay for homes.
For the past five years, the survey has examined the public's intentions to buy a home in the next three months and its perceptions about home prices. The survey has 500 respondents, half men and half women, comprising a representative sample of Israel's adult Hebrew-speaking population.
The public has not been able to ignore the unceasing rise in home prices since 2007, and adapted to the reality of high prices. Asked about the maximum price they would pay for a home 35.2% said NIS 1.2-1.3 million. 16.7% said NIS 1.5 million.
A comparison between the current survey and the previous one six months ago found a negligible rise of NIS 3,000 in the amount that homebuyers are will to pay for a home. The public's willingness to pay more has risen steadily since early 2009. However, whereas the average amount the public was willing to pay was NIS 1,103,000 in the first half of 2010 and NIS 1,249,000 in the second half, it only rose to NIS 1,252,000 in the first half of 2011.
Azimuth Advertising CEO Benny Keret said that the growing figure reflected the public's previous acceptance of the rise in prices. However, he believes that the current figure indicates that "the public has reached its limit to pay for a home."
Alongside the higher home prices that the public is willing to pay, the type of home people are seeking has changed. Demand for three-room apartments fell from 23% of potential homebuyers in the second half of 2010 to 12% of potential homebuyers in the first half of 2011.
Mutagim Research CEO Avi Peer attributes the plunge in demand for three-room apartments to lack of available apartments. "This does not necessarily reflect a drop in need, but a lack of confidence in finding a three-room apartment," he says. He believes that contractors ought to note this finding for future projects, and that cities should encourage the construction of three-room apartments, in order to attract young people.
Keret believes that the findings also clearly point to the departure of investors from the real estate market.
Whereas demand for five-room apartments is unchanged, and demand for six-room apartments fell from 9% of all potential homebuyers in the second half of 2010 to 2% of all potential homebuyers in the first half of 2011, demand for four-room apartments rose by 6% in the first half. Keret believes that the growing interest in four-room apartments indicates a "real housing need".
Demand for three-room apartments continues to shrink, but demand for smaller apartments continues to grow. 7% of potential homebuyers in the current survey said that they were seeking a studio or two-room apartment, up from 2% of potential homebuyers in the previous survey.
Does the increase in demand for small apartments reflect homebuyers' lack of wherewithal to buy a larger apartment, or is it a new trend? Keret believes that the survey findings indicate a new lifestyle: individuals and couples living in studio and two-room apartments. He believes that in most cases, individuals and couples over 30 are willing to compromise on living space in favor of a central location suited to their lifestyle.
Israelis have given up the idea of buying a house, even a small one. In May, a quarter of people who considered buying a home in the next six months changed their minds, according to the Consumer Confidence Index for June, compiled by Globes Research and pwc Israel. Fewer people are considering a new or second-hand apartment, and many fence-sitters have given up the idea altogether.
Only 6.4% of respondents in the June consumer confidence survey expressed an intent to buy an apartment, down from 8.5% in the May survey. The figure for June is the lowest figure for over a year. The number of people considering buying an apartment has fallen for three consecutive months.
The biggest change in the June consumer confidence survey was the plunge in the number of fence-sitters. Previous surveys found a large group of people who were waiting on developments before deciding to buy an apartment in the next six months. In just one month, the number of fence-sitters fell by over 40%, explaining why fewer people are willing (and running) to buy apartments.
Published by Globes [online], Israel business news - www.globes-online.com - on July 11, 2011
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