Real Estate Slowdown Continues, Developers Face Squeezed Profits
Translated & summarized from Ice by baba
Israel's real estate market is experiencing a slowdown, with developers lowering prices and buyers becoming more cautious, according to former Contractors Association chairman Avi Zeituni. While demand persists, particularly in certain regions, economic uncertainty and interest rate policies are impacting sales. Zeituni believes a return to stability, coupled with more significant interest rate cuts, is needed for market recovery. He also noted that developer profit margins have decreased, with some projects yielding only 3-4% profit.
The story in 5 lines · by baba
- Real estate market slowdown continues with lower prices and cautious buyers, says Avi Zeituni.
- Demand remains strong in areas like Rehovot, Ness Ziona, and Yavne, especially for families.
- Economic uncertainty, elections, and security threats are deterring buyers, Zeituni explains.
- Zeituni calls for larger interest rate cuts to stimulate the housing market.
- Developer profit margins have shrunk, with some projects yielding only 3-4% profit.
The Israeli real estate market is experiencing a noticeable slowdown, with contractors lowering prices and potential buyers adopting a more cautious approach. This trend is particularly evident in the resale market, and apartments lacking a protected room (Mamad) are contributing to a decrease in average prices. Avi Zeituni, former chairman of the Contractors Association in Tel Aviv and an entrepreneur, confirmed the slowdown is felt in sales offices. He noted that buyers are more hesitant, take longer to decide, but emphasized that the market is slowing rather than stopping, with deals still being closed.
Zeituni highlighted strong demand in areas like the Shapira region, specifically in cities such as Rehovot, Ness Ziona, and Yavne, driven by families and those looking to upgrade their homes. He pointed to a 25% increase in apartment sales in the third quarter according to CBS data, indicating persistent demand. Zeituni believes that as interest rates continue to fall and economic certainty grows, sales will improve, especially for quality properties in good locations at the right price.
While interest rates are decreasing, Zeituni stated they are not the sole cause of the slowdown. He cited general economic uncertainty, upcoming elections, and security threats as factors causing potential buyers to postpone significant financial decisions. He also suggested that the Bank of Israel's cautious approach to interest rate cuts, with reductions of only 0.25% at a time, is too gradual and called for a more substantial cut of at least 0.5% to stimulate the market.
Looking ahead, Zeituni anticipates a market turnaround when stability and certainty return, hoping for a stable government that prioritizes the housing crisis and implements clear, long-term policies to increase supply and streamline construction. He also mentioned the potential impact of the purchase tax, noting that if the current rate is not extended, it could reintroduce investors to the market.
Zeituni also addressed profit margins for developers, acknowledging that while some projects might yield lower profits of 3-4% due to rising costs and extended timelines, this is a necessary risk for securing financing and completing projects. He stated that developers should not apologize for making money, as they undertake significant investments and risks. He also clarified that out of an estimated 85,000 unsold apartments, only about 15,000 are ready for immediate occupancy.
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