Israeli Real Estate Market Faces Slowdown, Developers Adapt Strategies
The Israeli real estate market is experiencing a significant slowdown, forcing developers to adapt their sales strategies. Yaki Amsalem, CEO of Almog Group, a construction and development company founded by his parents, notes a shift from the previous market where prices consistently rose and developers aimed to maximize profits over the project's lifespan. Today, developers are pressured by slow sales and are offering unprecedented benefits to attract buyers, a trend Amsalem believes damages the industry by devaluing the product.
Amsalem highlights that while Almog Group avoids extreme "fire sale" tactics and has zero cancellations, they still offer standard industry incentives like the "20/80" payment plan. He explains that developers are hesitant to openly admit price reductions because it can harm the entire sector's perception. However, price adjustments are considered on a project-by-project basis, depending on location and market conditions, with projects in areas like Tel Aviv having different considerations than those in Ashkelon or Yavne.
The current market is described as a correction, with Amsalem refuting predictions of a 30% price drop, stating such a decline would cripple the real estate industry. He points to specific examples, like a project in Bat Yam where only 3 apartments were sold in the past year, indicating a severe inventory issue. Inexperienced developers who entered the market at its peak with high land costs and inflated prices are now at risk of significant losses, which Amsalem states is the nature of business.
Amsalem attributes the market's current state to several factors, including the "Price for Me" housing program, which he claims distorted prices by forcing developers to subsidize subsidized units with profits from free-market sales. He also cites rising interest rates, the COVID-19 pandemic, and security events like October 7th as contributing to sales stagnation. Despite the challenges, Almog Group is launching its largest project to date, "Tel Avivah" in Jaffa, a 26-dunam urban renewal project featuring 800 apartments, with pre-sale registration showing promising interest.
Almog Group is also diversifying into other sectors, including hotels, commercial spaces, and rental housing. The company has merged with the Pra hotel brand and plans to open several new hotels. Amsalem believes rental housing is a viable solution for Israel but requires government support to improve its economic model for developers. He also discusses the company's internal operations, including acquiring businesses to reduce production costs and developing construction technologies, and hints at potential external construction services in the future. The company is also considering a stock offering within two years, contingent on market stability.
