All that Glitters is still Gold!

Jerusalem Market – Golden Opportunities

During the year to end-Q3 2012, the average price of owner-occupied dwellings in Israel rose by 2.56% to ILS1,132,000 (US$299,086), after a year-on-year (y-o-y) rise of just 1.11% in Q2, and a decline of 1.56% in Q1 2012, according to the Central Bureau of Statistics (CBS). When adjusted for inflation, house prices are up by 0.79% y-o-y to Q3 2012.

On a quarterly basis, nationwide house prices increased by 0.17% in Q3 2012, but were down by 0.4% when adjusted for inflation.

Israel’s economy expanded 2.9% y-o-y in the third quarter of 2012, fuelled by rising private consumption and exports. The Bank of Isreal has revised its 2012 growth projections to 3.3%, from 3.1%.

During the first ten months of 2012, the total number of dwellings sold rose by 9.9% year-on-year to 17,562 units, according to figures released by the Bank of Israel .

An announcement by The Israel Land Administration (ILA) that around 35,000 homes are to be developed on land formerly leased to the Defense Forces (IDF) signifies the Israeli government’s commitment to lowering house prices in light of growing domestic unrest. The allocation of land for commercial development is part of a broader raft of policies aimed at stemming inflation and providing affordable housing, with the Bank of Israel also using monetary incentives to discourage certain types of mortgage lending. The moves support the  view that the construction industry will continue to grow at above the 3% level into 2013. House prices in Israel have risen rapidly in recent years, raising concerns that a bubble has formed in the property market. However, an increase in supply, coupled with very conservative measures on the part of the government designed to bring down prices, have seen a calming of the market in the past few months.

Although prices have remained relatively stable in the last year throughout the country, the Jerusalem market is a unique market with a character all unto its own. Due to a myriad of buyer profiles and an even larger variety of needs, the Jerusalem market is resilient to the general market trends throughout the country”, states Alyssa Friedland, Broker/owner of RE/MAX Vision in Baka.

It is true that the number of transactions has fallen in the last year by about 20%, according to real estate market sources. Also, in the less desirable neighborhoods on the city’s outskirts, prices dropped by about 10%. But four transactions that went down in January drive home the point that the capital city has unique offerings – and that there is always someone who can afford them.

Two apartments were sold at the Waldorf Astoria complex for NIS 8-9 million each. Near the Foreign Ministry complex at the entrance to the city an apartment was sold for NIS 6.3 million. The fourth deal, for a 140-square-meter apartment in the German Colony, was for NIS 8 million. That’s about NIS 60,000 per square meter. In all four cases the sellers got the price they wanted

Jerusalem / Ultra-high-end housing proves resilient

Price levels may have receded throughout much of Israel during the last 12 months, but not in Jerusalem’s market for high-end housing.

It is true that the number of transactions has fallen in the last year by about 20%, according to real estate market sources. Also, in the less desirable neighborhoods on the city’s outskirts, prices dropped by about 10%. But four transactions that went down in January drive home the point that the capital city has unique offerings – and that there is always someone who can afford them.

Two apartments were sold at the Waldorf Astoria complex for NIS 8-9 million each. Near the Foreign Ministry complex at the entrance to the city an apartment was sold for NIS 6.3 million. The fourth deal, for a 140-square-meter apartment in the German Colony, was for NIS 8 million. That’s about NIS 60,000 per square meter. In all four cases the sellers got the price they wanted.

But brokers report that closing deals for more than NIS 4 million has become tougher than it used to be. Most of the buyers for such properties are nonresidents, and grim times for the world economy are not conducive to deal-making.

Sellers of cheaper properties in the city center are getting what they want. A four-room apartment in the Greek Colony went for NIS 2 million, and a two-room apartment in Sha’arei Hesed was sold for NIS 1.9 million. These are the same price levels as a year ago.

If the housing-cost protests had an impact, it was on the Jerusalem outskirts: Kiryat Yovel, Gilo, Har Homa, Pisgat Ze’ev and the Katamonim. There prices generally fell back two years in time, by up to 10%.

A three-room, 75-square meter apartment in Armon Hanatziv went for NIS 920,000, down from NIS 1 million a year ago. A four-room apartment in French Hill sold for NIS 1.3 million; a year ago the seller could have gotten NIS 1.3 million.

Contractors noticed the changes in the market and have been amending their plans. Some lowered prices 5% to 10%.

If there’s a sector more affected than others, it’s high-end housing for Haredim in Jerusalem. Asset prices shrank by about 15%. Apartments some 150 square meters in area in Mekor Baruch are selling for about NIS 2.4 million, compared with NIS 2.7 million a year ago. An 85-square-meter apartment, sold two years ago for NIS 1.85 million, was resold recently for NIS 1.7 million. Again the reason is the steep increase during previous years, to levels that proved unsustainable in these times.

Despite the drop, housing in the capital, including in the Haredi neighborhoods, is beyond the means of most young families. They have all but disappeared from the Jerusalemite real estate scene and have little choice but to live elsewhere.