The Covid-19 pandemic, apart from its disastrous public health consequences, has led to an unimaginable economic fallout, enveloping the entire world. In most countries, the bottom has dropped off the booming sectors of their economies, as it happened in Israel’s housing industry. Real estate professional, Shelly Levine, said “Especially with real estate, people are not going to make major economic decisions when the world is in this position. It’s like the world is in a stopgap [status].” Another real estate marketer observed, “In Israel, people froze.”
Indeed, as the pandemic revved up, and people lost jobs, and slipped down the income ladder, Israel’s real-estate market dived. The Israeli Employment Service recently stated that over 200,00 people have registered as unemployed, since a lockdown in September to prevent a second wave of the virus. Most of the recently unemployed are those furloughed or placed on unpaid leave. Numbers indicate that over 4 million people, which is almost a quarter of Israel’s workforce, are currently unemployed.
Yehuda Katav, head of the Tel Aviv and Central Israel Association of Contractors and Builders, said that a third of households paying mortgage, requested payment freezes during the pandemic.
Israel’s Finance Ministry recorded a 27% drop in sale of apartments in Tel Aviv in the second quarter of 2020, when compared to 2019, with sales amounting to only 16,800 apartments. This is the lowest since 2003, when violence from the Palestinian Second Intifada destroyed the economy. Compared to the first quarter of 2020, when the pandemic had not yet affected the economy, apartment sales in the second quarter dropped by 25%.
Prices also have plummeted to their lowest levels in two decades. The demand has been significantly affected by the inability of young couples to buy houses. A review of the last quarter shows that only 7,300 apartments were purchased by young couples. Moreover, government-subsidized home-buying too has dropped drastically; with only 19,500 bought in the last quarter, it is at its lowest since 2011.
There is also increasingly lesser demand for office space, with most people working remotely at the height of the pandemic; even now, having passed the tough early months, few people come in to work. Most work from home. This has led to office complexes in Tel Aviv offering space at half-price in order to break even. Many realtors believe that the demand for office space will never return to the pre-Covid levels.
Other realtors, like Asy Ben-Amram disagree that the whole blame for the onset of teleworking should be laid at the door of Covid-19. She said, “Covid-19 didn’t invent something new. Hi-tech people already worked from home. Now, other offices, like law firms and accounting services, are also willing to do that.”
Furthermore, the pandemic has led to innovations in office rentals, such as the “coronavirus clause” that assures companies, that, in the event of a nationwide lockdown, they will not be required to pay the originally agreed upon rent, and could pay a lesser amount.
In the meantime, the Knesset Finance Committee has approved the Israeli Finance Minister’s proposal to reduce taxes on purchases of residential real estate for people who already own a home. Moreover, Chief Economist of the Israeli Finance Ministry, Shira Greenberg believes that Israel’s housing market was already slowing down in February, before Covid-19 spread uncontrollably, leading to the lockdown.
Even though domestic demand for real estate is at a low ebb for Israel, significant interest has been generated among North American Jewish potential homebuyers, who would have, in other circumstances, flocked to Israel to benefit from discounted property sales. Lack of accessibility, with prospective buyers turned away at the airport for fear of Covid infection, has somewhat dampened prospects for lucrative overseas purchases.
However, Nehama Bogin, real-estate appraiser, believes the reduced property taxes would “encourage investors, especially Diaspora Jews who feel that this is the perfect moment to buy in Israel.”
A director of marketing of luxury apartments, Yuval Schultz, said, ““We’re seeing a 200% increase in inquiries about buying here due to Covid-19.” He feels that that for North American Jews who were already contemplating buying apartments in Israel, the pandemic “acted as a catalyst.”
To take advantage of this prospective demand, realtors are offering digital tours of apartments for sale and drone aerial shots of construction projects.
However, many homeowners in Israel, out of work and unable to pay their mortgages, are renegotiating payment conditions with banks. According to attorney, Anastasia Fux, “Banks have the ability to postpone the mortgage for at least three months, and almost every bank in Israel is doing so.” Also, fewer evictions take place as courts are closed.
Realtor Shelly Levine said, “The whole real estate market isn’t working because nothing is working. Real estate is very much connected to what goes on in the world, and [when] the world is in a terrible place, real estate is in a terrible place.”
The sense of hopelessness that envelopes a world exhausted in battling the pandemic, has spilled onto every part of society, especially the real estate market, so heavily reliant on human interaction. And, human interaction, for the most part, has to be at a distance right now, which has led to murky prospects for the future.
Yet, real estate can never lose in the long run. As former U.S. President, Franklin Delano Roosevelt, once said, “Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.”