From the ground up: A hot summer coming up, but no cooling in property prices

Sellers are holding firm and prices are not coming down.

Stone houses in Jerusalem (photo credit: Adi Benzaken)
Stone houses in Jerusalem
(photo credit: Adi Benzaken)
As we move into the summer months – traditionally the stronger period of the year for property sales – buyers are gearing up for an assault on apartment prices. But sellers are holding firm and prices are not coming down.
There have been a number of sales of high-end (over NIS 5,000,000) properties over the last few months, with deals being made in some of the new upscale projects, as well as in historical, luxury areas. While prices per meter vary, some of the properties sold commanded upward of NIS 50,000 per meter for super-luxury homes.
Even the more standard “cheaper” apartments in the central areas are retaining their values, with properties selling for the same prices as a year ago and, in some cases, even a little more.
Although the less central cities and outlying neighborhoods of the main metropolitan cities have seen minor price reductions of a few percent over the past few months, these drops are more market corrections to the meteoric price rises these areas experienced in the last few years rather than an indication of long-term falling prices. This, coupled with the movement, albeit slow, of young couples toward less central areas, makes it highly likely that these slight price drops will be reversed over the summer.
Even the various proposals made by the finance and housing ministers – although likely to create slight price reductions in specific markets – are not likely to have much, if any, impact on prices in the short term. Any results from these proposals will be felt only in 2015.
This, coupled with the return of investors to the market as interpretations to the recent changes in the property taxation laws become clearer, make it unlikely that we will see any major price drops this summer.
The flip side to the good news for sellers that prices are holding firm is that the number of deals being made has dropped slightly (central Tel Aviv notwithstanding) and will continue to decline while buyers wait for the drop in prices that is not materializing.
The average seller has two choices: either wait until he finds a buyer willing to pay his price or lower the price to lure the buyer off the fence. As evidenced by the recent market, most sellers are choosing the first option, and so prices remain high while the number of deals continues to fall.
We are in for a long, hot summer…
Raphi Bloch is manager of the Re/Max Vision real-estate agency in Jerusalem.