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TEL AVIV HAS turned into a magnet for young people from across the country.
Photo: Ariel Jerozolimski
Our Experts
Israel Property founders Jonny Baker and Jonny Gaon - two native English-speakers - established their business with the simple concept of making the process of purchasing real estate in Israel easier for the overseas buyer. As more foreign residents and non-Hebrew speakers purchase and rent property in Israel, the practical issues involved in finding the right property can be daunting. Israel Property facilitates the often frustrating and time-consuming process of dealing with multiple agents in a foreign country and provides guidance from A to Z.
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The current global economic situation has widespread implications for the Israeli economy and the local real estate market. The distinct markets that exist in Israel are more difficult to discuss in a catch-all manner and potential buyers should carefully consider the specific realities present in the location they prefer, take an open-minded look at their own reasons for wanting to purchase property in Israel and base decisions on an honest assessment of these factors.
Overall, prices have not fallen dramatically, as has been the case in the US and Europe. The reasons for this are numerous, however three factors stand out in particular: the relatively mild impact of the global economic crisis on the Israeli economy, the high demand for real estate in the central part of the country and the rather unique psychology of Israeli sellers.
Whilst it is true that the effects of the economic crisis in Israel have not been as severe as other countries, many experts predict a general weakening in the Israeli economy over the next year or so. With unemployment set to rise in those sectors of the population owning the most property, owners may be prompted to sell preemptively or face failure to meet mortgage obligations which, in turn, may produce a fall in prices, at least in areas close to hard-hit economic centers. The effects on prices in prime locations and in specific high-demand areas may not be so pronounced.
It should be noted however, that purchasing apartments in new developments may provide the foreign buyer with opportunities to find favourable deals, as development companies are usually more able to reduce profit margins, are more concerned with a partially sold project on their books and are in greater need of recovering their investment at a time when credit is more difficult to obtain.
With the new "Heftsiba Laws" guaranteeing buyers' deposits, new developments are currently a particularly attractive prospect. That is not to say that good deals are not available presently for second-hand real estate - they are. As is always the case, a good real estate agent should be able to work according to your specific brief and advise you regarding properties that have had their prices reduced or offer reasonable possibility for negotiation.
Finally, the psychology of the Israeli seller: cultural and language barriers are often significant factors in the buying process for foreign residents and new olim. Two aspects of this cultural/psychological difference are that sellers are often willing (and to differing extents, able) to leave property empty for long time periods and many owners (especially in high foreign demand areas such as Ra'anana or niche areas such as Neve Tzedek) are under the often unrealistic illusion that by waiting for an affluent foreign buyer, they will receive their original price. These factors should be taken into consideration by foreign buyers who may expect that the current climate would provide the same "buyer's market" conditions seen in their home countries.
As major price reductions are usually to be found at the stage when potential buyers engage in earnest negotiations, buyers should bear in mind that excellent deals are available and in practice, correlate strongly to the seriousness of the buyer.
The coming 12 months will certainly bring changes to the extent that these three aspects impact the real estate market in Israel and there is good evidence to suggest that sellers are increasingly ready to lower prices due to the unwillingness of buyers to pay current levels. Purchases of real estate for investment is currently almost double the level of 2008 and this is a good indicator that sellers are willing to compromise on price.
