As the Jewish new year approaches, Summer 2012 is coming to an end. How did the “busy season” fare this year in the Tel Aviv real estate market?
It was a time of both excitement and uncertainty to be sure. One cannot be in Israel (or anywhere in the world, for that matter) without hearing the headlines about geo-political and internal strife in Israel, nor can one escape the reality of the global financial crisis. As usual, many thought that these, along with the “the prices will soon go down” line, would have great effects on both domestic and foreign buyers in the Tel Aviv property market. The opposite, it seems, appears to be true. Summer 2012 was a good season for the Israeli and Tel Aviv real estate markets overall, with prices remaining stable in spite of the global financial crisis and geopolitical tensions. The amount of new mortgages hit record levels in July, with 4.9 billion NIS of mortgages being issues in that month alone. Overall prices raised .8%, which is not very significant, but it didn’t go down either. Overall sales throughout the country were up 9% going into Q3, and 11% from the corresponding period in 2011.
For the past two years now the critics of this market have claimed that prices are to plummet imminently, and that the market is an artificial bubble, the property market has stayed firm and true to the basic economic principle of supply and demand. Tel Aviv is a global city and is growing in importance every year. Each month our firm sees more and more expatriates, new immigrants, and international business people moving to the city looking for high quality homes for themselves and their families. Besides this, domestic buyers, who have worked hard and have saved up for their down payments, are entering the market for no other reason that besides that buying simply makes the most sense to them. When one has money to invest and finds the right place for the right price, they will most certainly buy, and this is what we have seen over the past few months.
Rumors were abound this summer in the international community that Israeli sellers were becoming “desperate”, and dropping prices way below market value. While this may have occurred in some instances, this has less to do with the real estate market’s health, than with the specific conditions of a seller. Overall, prices remained stable this summer, despite the headlines. Those buyers looking for a cheap deal were mainly disappointed. That’s not to say, however, that there weren’t finds to be found, but it wasn’t the norm.
Obviously no one can be a prophet, and no one can foresee world and economic events. What can be said, however, is that as long as Israeli continues to gain prominence on the world stage, Tel Aviv will be a desirable place to live and prices will maintain stable. Anyone who has ever bought or rented a home in Tel Aviv knows of the great shortage of high quality accommodations, with the best properties always commanding the highest prices, despite their apparent “worth”. Now we’re seeing the trickle down. Some may indeed call this a bubble, but how does one truly define a bubble? Even economists can’t agree on a scientific definition of the term. The demand is here, if it will stay no one can say. But as long as it is, bubble or not, the market will continue to hold strong.
So what can we take out from this? If you’re a buyer, know that finding the perfect property can indeed take time, with there being a lack of premium properties on the market at this time. If you have the money ready, and you find your next home, don’t hesitate, because there are a great larger number of buyers than sellers. If you’re a seller, don’t assume that you can raise the price of your property through the roof because of the demand. There are still acceptable price ranges on every property, and if you’re overpriced, you won’t sell. Period.
If you’re a renter, be prepared to pay more in rent this year than last, with the average 1BR going for 4,500 NIS. with higher quality units commanding prices exceeding 5,500 NIS. The average 2 and 3 bedroom units rent for around 6,000 and 8,000 NIS respectively, with more premium apartments renting for anywhere from 7,000 – 12,000 NIS per month. Investors, don’t get too excited about the rising rents, as 1 bedroom units for investment are averaging around 1.5 – 1.8M NIS and quality 2 bedroom units going North of 2.4M NIS. The average yield in Tel Aviv still hovers slightly above 3%, so if you can snag something for 4+%, go for it – in a heartbeat.
L’Shana Tovah uMetuka ve Chag Sameach (To a good and sweet year & happy holidays!)