New apartments. Not enough of them?
Photo: Doron Golan
Real estate bubble showing cracks in central Israel
Mamon and WinWin real estate index show 5% decrease in second-hand apartments in major cities. One main reason for drop is peak in apartment prices
So, you still haven't bought an apartment? The prices of second-hand apartments in the center of Israel dropped slightly in March and April, according to the real estate index published by Mamon and WinWin.
One of the main reasons for the decrease is that apartment prices reportedly topped out far above the economic capability of the average apartment buyer. In addition, the number of real estate investors dropped. While last year, 40% of apartment buyers made transactions for investment purposes, this year, they make up only 16-18% of apartment purchases.
There has also been a drop in the number of buyers' groups, which has been a main driver in the real estate market, following new regulations issued by Supervisor of Banks Roni Hizkiyahu regarding bank loans.
However, the real estate bubble still has not burst mainly because mortgage rates remain low. Figures published last week by the State real estate assessor's office show that apartment prices in Israel rose 4.1% in the first quarter of 2010 in comparison with the preceding quarter.
Overall, since the first quarter of 2009, there has been a 16.6% jump in apartment prices in Israel. In Tel Aviv, for instances, this surge reached 30%. Beersheba apartment prices rose by 23%. In Haifa and Petah Tikva, apartment prices rose by 21% in the last year.
"The asking prices today are still high. People looking to buy their first apartment will find it difficult to purchase property," explained an editor of the Levi Yitzchak price list. "Therefore, many stay living in rental places or in their parents' house. Only people who receive generous help from their parents can buy a first apartment. However, the second-hand apartment prices have not gone up at all practically in the past two months. In some places, there has even been a decline."
'There is no bubble'
According to Association of Contractors and Builders Director General Yossi Gordon, there is no real estate bubble in Israel."The apartment prices in Israel are a direct result of the lack of new apartments. In this decade, fewer apartments have been built in Israel than the demand created by the growth in households. Therefore, there is a slump of more than 20 years in the number of new apartments being put up for sale," explained Gordon.
Using the Levi Yitzchak price list, Ynet determined in which locations prices have dropped, stabilized, or risen in the past two months.
In old three to four room apartments in Rishon Lezion, there has been a 5% drop in prices. In apartments on higher floors without an elevator in Herzliya (mainly in 4 room apartments) there has been a 4% drop in prices. In Kfar Saba, three to four room apartments on a high floor without an elevator have decreased 4% price, while apartments on low floors in buildings without an elevator prices have dropped 1%.
In four-room apartments in Netanya center on high floors without an elevator, there was a 5% decrease in prices. Prices for old apartments on low floors decreased by 2%. For old apartments without an elevator in the agrobank neighborhood in Holon, prices dropped 2%. In the Petah Tikva neighborhoods Kfar Ganim Gimmel and Em Hamoshavot, prices are stable with a slight trend downward.
In Tel Aviv, the picture is a mixed bag. Prices for two to three room apartments in the center in old buildings remained stable. However, two-room renovated apartments with an elevator increased 10% in price. Prices for four-room apartments with an elevator in the north-center of the city rose by 2%. Prices for four to five-room apartments in the new northern neighborhoods decreased by 1%.
In south Tel Aviv, two to three-room apartment prices remained stable. Four to five-room apartments without an elevator dropped 3% in price.
