We are constantly hearing that the Israeli real estate market is in a freeze and that people are waiting for prices to go down and therefore not buying or selling at this time. In a recent Globes newspaper article, Dror Marmor listed of the six types of people under the most pressure to buy or sell apartments despite the current “real estate freeze”:
- Hundreds of contractors with a reported 20,000 new apartments on the market waiting to be sold. The contractors with apartments to be sold in the south are especially feeling pressure due to the 3,800 unsold apartments there.
- Contractors and real estate developers who bought land at higher prices are being pressured by the banks to start developing and selling new apartments rather than holding on to the properties and waiting for a more profitable time to begin development and sales.
- Many Israelis have purchased new apartments but have not yet sold their current homes before they can move into their new ones. These people are now concerned that when they finally do sell their current apartments, the prices will be significantly lower than what they had anticipated when they entered the apartment market.
- Many Israelis who are currently in a position to purchase a new apartment are wary of the anticipated price drop that is predicted at the end of the current freeze. They remember all too well the end of the real estate freeze in 2008 when prices increased rather than decreased as was expected.
- People who want to live in areas in high demand yet with few available apartments – such as Tel Aviv are feeling a great deal of pressure from reports of low demand and high supply of available apartments in areas such as Ashkelon and Be’er Sheva.
- Newlyweds whose parents insist on buying their first apartment but are unable to do so in the current market.
Reading this report made me keenly aware how dependent we are on the media. In 2008, in the wake of the real estate crash in the United States, an otherwise healthy Israeli real estate market was plunged into a freeze. While the press pondered whether it could happen here, it actually developed into a self-fulfilling prophecy.
The current “freeze” is fueled by questions such as whether we are in a bubble and when that bubble will burst. The Ministry of Finance has enacted a series of changes in tax laws allowing additional exemptions from capital gains tax to sellers and raising taxes on those who purchase apartments as investments. Is this not playing with the market? What will happen to the average citizen who sells his apartment at a loss due to the “forced” falling prices? These measures taken by the Ministry of Finance are similar to insider manipulation of the stock market. I believe it would be better for us all if the market was left to fend for itself – come what may.