From changing sales figures to the way available homes are shown, this global pandemic is changing the real estate market globally. How and why is Israel different?
While demand rises, the supply is at an all-time low
The Israeli government has been trying for years to reduce the gap between supply and demand in the housing market with no foreseeable success. The closure and the halt in incoming flights caused a slowdown across the country, widening the gap, especially in urban centers, such as Jerusalem and Tel Aviv.
While supply is about to reach an all-time low, it seems that demand is on the rise since some potential buyers are recalculating their priorities and looking for projects that promise a higher standard of living in the years to come. Since the gap is the main factor as far as housing prices are concerned, it will most likely cause an eventual increase in prices.
Leading the OECD in natural and economic growth
Israel’s natural growth will probably remain the highest in the OECD organization with 3.1 births per woman (the average in the OECD: 2.1). This natural growth is a significant contributor to Israel’s economic growth, along with the hi-tech and innovation scene and new prospective markets in the Persian Gulf.
In the past, Israel has proven its ability to recover rapidly from global recessions. Buyers and investors alike have confidence that it will do so again.
Preparing for 250 thousand new Israelis
Israel is considered a Red state now, but mortality rates show that the health system is resilient and capable. Jews and Israelis from Europe and America have been expressing their intention to move to Israel thanks to the way we have been dealing with the virus and to stay clear of anti-Semitism that might arise due to a global economic crisis. The Jewish Agency announced in May that it expects 250 thousand Olim in the following five years.
The interest from abroad goes beyond people considering Aliyah. Although the Israeli banks have been more conservative than ever as far as foreign investors are concerned, the local housing market remains attractive since it embodies high potential and low risk. For the Jewish diaspora, Israel promises a safe haven in seemingly troubled water.
A favorable tax policy
While the previous finance minister decided to exclude investors from the housing market and increased the purchase tax to 8% in 2015, Minister Katz wanted them back in the game and lowered it to 5%. Although the investors never left the scene, it seems that the reduction, together with the trend of investing in urban centers, where renters enjoy a higher income, has intensified their search for the next opportunity.
Buying an apartment remotely
As demand is actually on the rise, real estate developers are trying to figure out ways and tools to showcase their properties online, especially to international buyers who are limited with their ability to travel due to Covid-19 restrictions.
According to Yuval Schultz, Director of Marketing at Asden Israel, one of the leading real estate companies, “The real estate business has always depended on in-person meetings which create the confidence and trust which are the foundation for any successful interaction. During a time of global uncertainty these factors have never been more important.”
Over the years, Asden has had the privilege to work with many international buyers and developed a healthy balance between virtual and human tools that facilitates the process. First and foremost, the company relies on connecting and listening to clients. In-person virtual interactions provide clients with both information and professional advice regarding law, finance, and tax information required to be able to make remote decisions with confidence.
Winter is coming
As winter approaches, the question arises: how would a positive or negative development of the pandemic affect Israel’s housing market?
For the answer, we should look at what is happening in the real estate sector and examine the leading players’ strategy. While some of the principal entrepreneurs in Israel express concern about winter approaching, it does not appear to have affected buyer motivation.
What concerns developers is the significant delay in statutory issues, which prevent projects from advancing and construction completion. As mentioned, the real estate market is already in a situation where demand is significantly higher than supply and additional delays will further limit the amount of properties available.
Despite the fact most homebuyers in Israel and abroad are aware of this gap they are still in a hurry to complete transactions before 2021. Knowing that historically Israel’s housing market remains strong throughout any economic crisis is knowledge buyers are apparently willing to count on.