Discount Apartments in Elad Face Market Shift, Potential Financial Pitfalls
Translated & summarized from Kikar HaShabbat by baba
A new 'Dirah Ba'Hnacha' apartment sale in Elad faces a challenging market due to falling second-hand prices and increased supply. While past buyers saw significant profits, current participants may see reduced gains and face high mortgage payments. The developer's strategy of attaching costly storage units further complicates affordability. The author suggests the project is suitable for patient investors, warning those seeking quick profits with limited funds against potential financial hardship.
The story in 6 lines · by baba
- New 'Dirah Ba'Hnacha' apartment sales in Elad are starting next week amidst a market downturn.
- Second-hand apartment prices in Elad have fallen, with fewer buyers than available properties.
- Potential profits for 'Dirah Ba'Hnacha' buyers have significantly decreased compared to three years ago.
- Developers are adding costly storage units to apartments, increasing overall prices.
- Buyers of apartments over NIS 2 million require a substantial 25% down payment.
- High mortgage payments could strain buyers with limited capital, potentially leading to cancellations.
A new round of discounted apartment sales, part of the 'Dirah Ba'Hnacha' (Discount Apartment) program, is set to begin next week in the city of Elad. However, potential buyers are cautioned to carefully assess the current market conditions, which differ significantly from those of three years ago.
Elad experienced a housing boom driven by a lack of construction for 13 years, creating a closed market where prices for four-room apartments reached NIS 2.4 to 2.6 million and five-room apartments neared NIS 2.8 million. Approximately 96% of buyers were local residents upgrading their homes. Now, with more existing homes on the market than buyers, second-hand prices are falling across Israel, and contractors are struggling to sell new units. A five-room apartment recently sold for NIS 2.5 million, and three-room apartments listed at NIS 2 million closed for NIS 1.9 million.
The 'Dirah Ba'Hnacha' program, which previously offered significant profit margins, has seen its potential gains shrink. Three years ago, developers paid NIS 11,500 to 12,000 per square meter, with buyers expecting profits of NIS 650,000 to 700,000. Today, the cost per square meter is NIS 17,000 to 18,000, reducing potential profits to an uncertain NIS 350,000 to 400,000.
The current project offers 96 three-room, 160 four-room, and 112 five-room apartments. A notable tactic by the developer involves attaching large storage units to some apartments, potentially increasing their price by up to NIS 200,000. Prices before indexation and interest are NIS 1.67 to 1.9 million for three-room units, NIS 2.14 to 2.17 million for four-room units, and starting from NIS 2.4 million for five-room units. Buyers of apartments over NIS 2 million need a 25% down payment, approximately NIS 500,000, which can be partially deferred.
For individuals with limited capital, such as a Haredi man with NIS 200,000, the required mortgage of over NIS 2 million would result in monthly payments of NIS 10,000 to 11,000, significantly exceeding average rental income. This could lead to substantial financial strain and potential cancellations of purchases. Despite these challenges, Elad is slated for future development, including office towers and a train station, with projections to become a significant Haredi city by 2031-2032. However, the influx of resale apartments by then may pressure prices downward.
The author advises that the current offering is best suited for investors with financial backing and patience. Those buying for residency must ensure they can comfortably manage mortgage payments. Individuals expecting quick profits with limited capital risk facing financial difficulties, as holding the property until its full potential is realized is crucial.