Israeli Developers Shift to Rentals Amidst Sluggish Apartment Sales
Translated & summarized from Ice by baba
Israeli developers are increasingly converting unsold apartments to rentals due to sluggish sales, particularly in Tel Aviv, where some offered discounts of up to 5%. Developer Tzachi Abu purchased 50 apartments in Netanya at a discount for rental purposes. While sale prices are softening, rental yields are reportedly increasing, creating a challenging market for potential buyers and renters alike. The government's slow progress on long-term rental projects is also highlighted as a contributing factor.
The story in 5 lines · by baba
- Developers are shifting to rentals as Tel Aviv apartment sales slow, with some offering discounts.
- Tzachi Abu purchased 50 apartments in Netanya at a discount for rental purposes.
- Falling apartment sale prices contrast with rising rental yields in some areas.
- The government is criticized for its slow progress on long-term rental projects.
- A future shortage of apartments in Tel Aviv is a potential consequence of current trends.
Developers in Tel Aviv are increasingly turning to rental properties as sales of new apartments slow down, with some offering discounts of up to 5% to attract buyers. One developer in Tel Aviv reported reducing prices from 55,000 shekels per square meter to 50,000 shekels to sell two apartments after a long period, before raising the price slightly to 52,000 shekels. This move was intended to show the bank the business was active, with the buyer receiving a discount of approximately 300,000 shekels per apartment. However, many developers are now facing difficulties and are considering renting out remaining units rather than selling at a loss.
One developer explained that to secure funding for future projects, they need to demonstrate ongoing sales, but the current market makes this challenging. This situation could lead to a future shortage of apartments in Tel Aviv, potentially driving up prices for those who waited. The article also criticizes the government's slow progress in marketing long-term rental projects in Tel Aviv and the surrounding areas.
In a separate deal, developer Tzachi Abu purchased 50 apartments for 120 million shekels from Azorim in the N. Weizmann project in Netanya. Abu acquired these apartments at a significant discount, estimated at around 15% or more, as Azorim struggled with sales. These apartments are now slated for rental, suggesting Azorim anticipates further declines in local housing prices. The Weizmann project faces challenges due to its central, noisy location and increased competition from new developments, with Azorim having sold only four apartments this year.
Abu reportedly bought the apartments at approximately 2.4 million shekels each, though some smaller units were sold at 2.2 million shekels. While Abu secured a 15% discount, his financing costs are lower due to the smaller purchase size. The expected rental yield in the Weizmann area is less than 3%, indicating Abu is banking on future price appreciation rather than immediate rental profit. The article notes that Abu paid only 15% upfront, with the remainder due upon delivery next summer, and dismisses rumors of a 20% price drop as attempts to instill public fear.
The article concludes by questioning the impact on renters facing annual rent increases of 5%, especially as developers report rising rental yields (6-7%) despite falling sale prices. This widening gap suggests a shift in market equilibrium, potentially leaving renters who waited for price drops in a worse position, especially after the upcoming elections.
