A MAN LOOKS out of an apartment window 370.
(photo credit: REUTERS)
It is a known rule of investing that when everyone is buying into the market,
then it is a fairly good indication that it is time to sell. Does this hold true
for today’s Israeli real-estate market ? Our columns typically discuss the
various legal aspects of property in Israel, including contract laws, ownership,
leasing, taxes, bureaucracy, etc. Since the publication of our last column, a
massive reform was enacted regarding property taxation – a reform so broad that
it could easily affect all home owners, especially foreign citizens who own
property in Israel.
It would seem only natural, therefore, for this
column to discuss the reform and its implication for our readers. We promise we
will do this in the next few columns. However, as we emerge from the High Holy
Days and Succot and the days of pondering, we’d like to utilize this column to
take pause. For before we can pass through the gates of property law, we must
first have the key to enter, a key that is becoming more and more exclusive: the
means with which to purchase a home in Israel.
It is no secret that
prices of property in Israel have soared over the past several years, placing
Israel above all other OECD countries in the number of average salaries needed
to buy an average home: currently 135 salaries in Israel, according to the
Construction and Housing Ministry.
Compare this to 74 salaries in France,
64 salaries in England and 65 in the United States.
Two years have passed
since the massive protest against the ever-rising cost of living. Since that
time many headlines have announced various plans to enact change, to bring down
prices and to make housing more affordable. The housing crisis took center stage
in the latest Israeli elections campaign, with promises being doled out left and
As for results? Well, prices have only continued to climb ever
higher. Whatever initiatives and reforms were actually set in motion, they have
not produced the desired results. On the contrary, many changes have in fact
made it even more difficult for young families to purchase homes, such as
ever-tightening restrictions on mortgages. While some of these restrictions may
be meant to both cool and secure the real-estate market, what we have seen thus
far in the short term is that an even larger obstacle has been placed in the
path of potential firsttime home buyers.
To make matters worse, it seems
highly unlikely that we will see a drop in prices over the next few years, since
housing starts have been dropping steadily, reaching a new low in the second
quarter of 2013, with just 8,797 (compared to nearly 12,000 in the same quarter
of the year before). What we can probably expect to see, therefore, are even
fewer homes available for purchase in the next two to three years, when these
starts are completed. The supply will be far lower than demand, in all
likelihood driving prices up even further.
Many young couples and
families see their dream of buying a home becoming more and more distant. For
many of these young families, there is no dilemma, since they simply cannot
afford to buy.
For these families the question is therefore not to buy or
not to buy; the real question is can they afford to buy? And, even worse, will
they ever be able to buy under the increasing tax burden and the low salaries
young Israelis obtain.
But what about the people who can afford to buy.
Should they? Is it a good time? Anybody who bought a home in Israel five or six
years ago “struck oil” as prices have risen steadily and significantly since
Many would argue that it is not a good time to buy, pointing out
all the indicators that we are currently in a real-estate “bubble” due to
explode at any time: the sharp and disproportionate rise in property prices well
beyond their fundamental value, the amount of average salaries needed to
purchase a home and the ballooning size of mortgages, to name but a few. Indeed,
some recent headlines seem to indicate a cooling of the market, with demand for
apartments falling (in some cases) over the last few months and prices in some
locations dipping ever so slightly.
On the other hand, in the main,
prices are still sky high and there does not seem to be an end in sight to the
There is no real, fully comprehensive action plan by
the government to forcibly lower prices. There is no viable plan to provide
affordable housing, and there’s nothing in the immediate future to show that the
government is going to provide rentals in lieu of purchase.
would seem that the government is at a loss on this issue. That coupled with the
low building starts would seem to indicate a consistent rise in prices, and if
prices will indeed rise, then it is obviously a good time to buy.
course, this is just an educated guess, and let’s not forget that buying a home
involves not only financial considerations but also personal, familial and
psychological ones as well. Home ownership rates in Israel have always been very
high, as owning your own home provides a certain sense of peace and security
that is lacking when renting.
As for the reform in property taxation,
that will be discussed in our next column.www.buyingyourhomeinisrael.com
firstname.lastname@example.org Dr. Haim Katz is a senior partner in a law firm with
offices in Tel Aviv and Jerusalem that specializes in real estate, international
trusts, family and inheritance law and corporate law. Sam Katz is a jurist
living in Jerusalem.