Image by Yair Haklai
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It’s happened to every single one of us. We buy something that we love, only to discover a week later that it’s on sale for a significantly reduced price than what we paid. Aggravating? Certainly, because we start to think that if we’d only waited a few more days, we could have saved so much money.
It was this type of scenario which came to mind a few days ago when I saw a clip on the nightly news about the Israeli housing market. There were endless scenes of brand new hi-rise towers and duplexes throughout the entire country – too vast to count, but, despite the great upsurge, the building continues without an end in sight.
The thrust of the broadcast was that this is definitely the right time to buy. Actually, yesterday would have even been a better time to buy! According to realtors, builders and those in the construction of housing, the clear message was that there’s no time to lose, because a delay or hesitation, on the part of Israelis, will merely result in the further rise of prices, in an already outrageously expensive market. In fact, it was presented as if higher costs were a given – a guarantee of which no one should doubt.
I suppose that this hard sell approach to purchasing a new dwelling made me a bit suspicious, because, up until now, despite continually upward prices, it’s hard to remember a push like this to almost scare the public into acting with haste in order to purchase one of these new apartments before a sudden price hike causes it to be of one’s reach.
So, this message of urgency began to make me wonder if the hype was being promoted just before an actual drop in housing prices is expected, something that many, in the know, have been predicting.
In a Forbes article, just a few days ago, entitled, “Housing Market ‘In Free Fall’ As New Construction Plummets – Here’s When ‘Reset’ Could Cool Prices, (6/16/22) it states that, “New housing starts unexpectedly plunged much more than economists projected – and for a second straight month.”
Although the article refers to the U.S. housing market, there are clear signs that a, once, robust industry is taking an opposite turn. Citing such changes, the article mentions such indications:
- The plunging of housing starts by a whopping 14.4%
- Building permits falling more than expected
- The overbuilding of builders since early 2021
- Interest rate hikes, making buying more expensive and demand lower
- Home builder stocks taking a hit as the S&P fell 3%
All these signals do not bode well for those trying to sell the public on this being the right time to purchase new housing, and this week’s expected rate hike, by the Fed, is expected to both slow the housing market even further as well as eliminate jobs in the industry.
So, the question is – will the Israeli housing market follow suit and mimic the U.S.?
Israeli Finance Minister Avigdor Lieberman already noted, earlier this year, that he believed housing prices would settle down and possibly even drop before the end of 2022. With the ambitious plan of 280,000 homes set to be constructed in Israel over the next couple of years, it would be good to know if this is truly an ideal time to buy or if waiting might be the smarter strategy. Buying now means paying top dollar (or in our case – top shekel) for housing which has gone up, in many cases, over a million shekels or more just over the past three years.
One thing for sure, most young people have found themselves in a position where they have been knocked out of the housing market as a result of these ever-increasing price hikes in every Israeli neighborhood – especially when it comes to new housing in more requested areas.
It’s actually gotten to the point where tents have been erected, in many locations throughout Israel, protesting the inability to purchase housing at a reasonable rate. In a Ynet report a few days ago, it stated, “As home ownership becomes increasingly elusive and renters feel the pinch in their pockets, frustrated citizens are pitching tents nationwide.” One such protestor said, “I made Aliya with my family. None of us own an apartment, and my mom is still far away from owning one, because she can’t save money…There’s no way I could afford an apartment with prices climbing higher and higher. Neither me nor any of my friends.” (Protest camps popping up across Israel as housing prices soar, Ynet, 6/15/22)
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Yet, amidst those exorbitant prices, at least one appraiser, Erez Cohen, believes that a major correction is coming. With interest rates expected to rise, per the Bank of Israel, over the next few months, as well as an overextension of loans both to developers and buyers, that could “pour water on the market and dampen demand for apartments and land.” Housing price rises in Israel could be set to end, Globes, 3/15/22)
The article further explains that the “flourishing hi-tech” sector has played another role in the expectation of greater demand for housing, but, of course, if a significant economic downslide occurs, as many, including CEO Jamie Dimon of JP Morgan Chase, have predicted, there is no doubt that global housing prices will plummet to unexpected levels. This ominous and bleak prediction could be one of the reasons that this particular clip, just a few nights ago, aired – encouraging Israelis to waste no time and buy now before prices climb even further.
Do any of us believe that savvy real estate developers and builders are totally in the dark in terms of the future of their industry as well as the dire warnings of an expected global economic crisis even before the end of the year? I think not!
Which is why this could have been an eleventh-hour attempt to frighten potential buyers to act now or bear the consequences of trying to achieve their dream too late. Of course, everyone has to do their own economic calculations and, in the end, come to the conclusion as to whether or not this is the optimal time to purchase a new home.
But as the saying goes, “Let the Buyer Beware,” because that shiny, new apartment that you want to purchase next week may end up a few hundred thousand shekels cheaper in just another few months – who knows. It’s a calculated risk which needs to be preceded by a great deal of thought in order to avoid the proverbial buyer’s remorse.
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