Waiting for COVID to End Before Making a Move? Don’t
By Shia Getter
I recently overheard one man ask another when he thinks we’ll finally be rid of coronavirus. “When we have a year without a 2 in it,” his friend quipped. COVID certainly seems like it’s going to be around forever — yet we hope and daven that it will soon end. No matter how long the pandemic lingers, we can’t keep our lives on hold forever.
A year ago, many people were expressing interest in purchasing property in Eretz Yisrael. Some didn’t let the pandemic stop them. They smartly went ahead with their plans. Yet many others remain exactly where they were in the process last year: nowhere.
That’s entirely understandable — but it’s also entirely a mistake. The ideal time to buy is now.
For the past 6-8 months, the Jewish Agency and Nefesh B’Nefesh have been reporting an all-time high in aliyah inquiries. Due to economic and political instability wreaking havoc on America, parts of Europe, and other places, as well as a frightening uptick in global anti-Semitism, and the corona-crisis, more Jews than ever are looking to move to Artzeinu Hakedoshah. In addition, with people and businesses adapting to working remotely from home, people are realizing they can have their cake and eat it, too, by moving here and working remotely from Israel.
The Jewish Agency expects some 250,000 Jews to make aliyah in the next five years. And Nefesh B’Nefesh is anticipating 90,000 new olim within the next year or so. Translation: a lot of Jews will be looking for places to live.
That rapid influx of people, coupled with Israel’s high birth rate — the highest in the OECD, at 3.1 births per woman on average (kein yirbu), means the country’s population is always increasing. That growing populace connotes an ever-growing housing demand. And herein lies Israel’s pesky little problem: supply.
Recent studies from the Central Bureau of Statistics (CBS) indicate that even with the COVID crisis and all the lockdowns, the overall decrease in apartment sales in 2020 was only around 2% compared to 2019. While that decrease is insignificant, supply indices revealed significant drops in almost all areas, from land released to new construction starts.
There’s a huge shortage of apartments. Over 42,000 chareidi children registered for first grade this year alone. Fast forward to around 15 years from now and you’ll have approximately 24,000 new couples looking for housing. Wow — and also yikes!
Although the Israeli government has created incentives and other initiatives to decrease the housing supply-demand gap, it has only grown. Approximately 40% of government supply was in the periphery (north and south), which led to price decreases in places like Afula, Nahariya, and Ashkelon. Yet those areas remain relatively unpopular (despite government enticements). Urban centers, meanwhile, (Yerushalayim, Beit Shemesh, Tel Aviv, Modiin, and so on) are facing an ever-widening supply gap.
Meanwhile, there was a dramatic decrease in residential building plans approved this year. According to Madlan, until November 2020, only 18,000 new apartments were approved in residential buildings, compared to 34,000 in the same period in 2019. (This isn’t just COVID’s fault. There were numerous political issues, like various government agencies not working together, control over different housing aspects passing from hand to hand, notoriously slow government approval, and general dysfunction caused by a paralyzed and collapsing government.)
And prices went up 4% overall in 2020. In terms of zoning, in the period up to November 2020, only 85,000 apartments were approved, while 104,608 apartments received approval in the same period in 2019. There was a 3.5% decrease in starting new construction of apartments and a 9% decrease in apartments that were finished in 2020. There’s also a shortage of foreign laborers, many of whom work in construction. In short, it’s a tough matzav.
If that wasn’t enough bad news, the Israel Land Authority, which sells plots to developers, almost completely halted activity in 2020. The ILA closed the first three quarters of 2020 having released enough land to build only 5,600 apartments across the country. Although government approval and land sales don’t have an immediate impact on supply, they make a difference in the long run and will be felt within three to four years.
Meanwhile, investors have been seeing real estate as a more solid venture than stocks, which have been so volatile this past year. Purchase taxes for real estate investors dropped to just 5% in July, making the market even more favorable.
Conclusion? The housing supply-demand gap is about to reach an all-time high. But wait, it gets worse.
Prices, Prices, Prices
While the pandemic may be changing the global real estate market, Israel is just different, an exception to world trends. (But you didn’t need us to tell you that! From the spiritual differences to, l’havdil, the way vaccinations are being handled so efficiently, Israel just runs on a different system.) Between our low housing supply, increasing demand, and favorable tax policy toward foreign property investors, one would expect local sales to be at a standstill.
Yet there’s been almost no drop in the number of new apartments sold. Yes, there were historic lows recorded in Israel during the beginning of the crisis, in March and April 2020. But that period was followed by record sales between May and June, and normal levels in July and August.
Meanwhile, the Israeli mortgage industry is growing. According to data published by the Bank of Israel, NIS 78.1 billion ($23.8 billion) in mortgages were taken out in 2020. This is the largest-ever total for a single year and represents a 15% increase over 2019. Industry experts tie this growth to the current low interest rate: just 1% in August and September. Tel Aviv, meanwhile, has seen the largest housing price increases in the past 30 years, according to the CBS. Analysts say prices in the rest of the country could rise as well.
So, what do all these stats and numbers mean, practically speaking? How do we translate these facts and figures?
What’s happening in the real estate market here is not making it to the headlines (those seem solely devoted to COVID and politics, sorry). When the news outlets begin to shed some light on what’s happening here, people will be in for a bombshell.
Israel’s housing market remained strong through previous economic crises, and it appears to be doing the same through this one. The property prices haven’t decreased in over 10 years (in places with demand, such as central Israel). That knowledge, along with the country’s major supply-demand issue, great mortgage and interest rates, and potentially increasing prices, is plenty of reason to resume your apartment search now. Those who are waiting for the skies to open before acting are in for a surprise when they do. Don’t let that be you!
Why get caught in the post-corona crush — at greater expense — when you can set the process in motion today? Contact The Getter Group to hear how we can find you just the right apartment and assist and advocate for you throughout the process, even from a distance, even during corona. Contact The Getter Group 718-473-3950 or email email@example.com.
This article is not a substitute for professional or legal advice. The author does not guarantee that the information contained herein is accurate, and does not assume any liability for any loss or damage caused by errors or inaccuracies in this article.