Discount Apartments See Price Hikes, Forcing Some Buyers to Withdraw
Translated & summarized from Ice by baba
Apartment prices in Israel have seen a slight official decrease, but the "Discount Apartment" program has experienced a marginal price increase, making some deals less attractive. Long waiting times and rising rental costs during construction are causing buyers in areas like Harish and Netanya to withdraw from their purchases. This trend is partly due to updated valuations and the program's focus on peripheral markets, where prices are more stable. Actual market price drops are often more significant than official figures suggest, especially in high-demand areas and for apartments lacking protected rooms.
The story in 5 lines · by baba
- Discount Apartment program prices have risen slightly, contrary to the overall market trend.
- Long waiting periods for discount apartments are causing some buyers to withdraw from deals.
- Actual apartment price drops are larger than official statistics suggest, especially in prime locations.
- Buyers in Harish and Netanya are forfeiting discount apartments due to delays and market shifts.
- The share of discount apartments in new sales has increased to nearly 46%.
Official statistics from Israel's Central Bureau of Statistics (CBS) indicate a minor 1.8% decrease in apartment prices, a figure that does not reflect the actual market dynamics, particularly excluding contractor promotions. When comparing peak prices from last year to current lows, the actual drop is closer to 3-4%, equating to approximately NIS 100,000. However, a closer look at the past year reveals a smaller decrease of about NIS 43,000.
Notably, prices within the "Discount Apartment" (Di'ra Be'Hanche) program, which accounts for nearly half of new apartments, have seen a slight increase. While new apartments overall dropped by 0.4%, excluding discount apartments shows a more significant 0.8% decline, implying a marginal rise of about 0.1% in discount apartments. This increase is considered unusual in a falling market.
Despite the appeal of discounted housing, long waiting times, sometimes up to seven years for project completion, can make these deals less attractive. The accumulated rent paid during this waiting period can exceed NIS 1 million. While typically cheaper than market-rate apartments, the overall cost-effectiveness has diminished for some.
In cities like Harish and Netanya, some buyers are forfeiting their discount apartment eligibility due to extended delays and perceived market price drops. They prefer to purchase existing properties immediately rather than wait for new constructions. In Harish, the issue is primarily the wait, while in Netanya, the price gap between the discounted price and current market value has widened significantly, reaching up to NIS 2 million.
The rise in discount apartment prices is attributed to updated government valuations used for new contracts and the program's focus on more stable peripheral markets. The share of discount apartments in total new apartment sales has also increased from 40% to nearly 46% in recent months.
Discrepancies between official CBS data and market reality stem from various factors. Dramatic price drops are often reported in high-demand areas like Tel Aviv, where a NIS 400,000 decrease might represent only 5% for a luxury unit. In peripheral areas, contractors are less likely to offer substantial price reductions due to banking constraints, with significant discounts usually indicating a distressed seller. In cities like Netivot, market behavior differs, with 24% of apartments selling at market prices, influenced by factors like tax benefits for residents relocating from the south.
