Since the demand for housing in Israel continues to far exceed the supply, prices will continue to rise in general, but real estate prices in the Israeli periphery are growing rapidly. The central areas – the bigger cities – have in the past three months stayed mostly steady with more moderate price increases. This imbalance between supply and demand will continue in the near and mid-term, as the government’s plans to release more land for building is taking time and will not make an impact on the market for years. Israel’s Government Appraiser just released new real estate data for the third quarter of 2010:
Where are the best areas to buy?
Currently the satellite cities around the central areas are the ones experiencing the highest growth. The Appraiser released average prices for a three-bedroom (four rooms, including the living room) apartment:
Ashkelon – just south of Ashdod, Israel’s largest port city, has seen a housing purchase price increase of 7% in the past three months, bringing the average prices to 727,000 Shekels (NIS), which is approximately $200,000.
Rishon LeTzion – just south of Tel Aviv, has seen a rise of 4% in the past three months. Average prices: 1,332,000 NIS (~$370,000) .
Hadera – north of Natanya and close to Caesarea, has seen a of 5% increase of resale prices to the average level of 874,000 NIS (~$240,000) for a three-bedroom apartment.
Nahariya – north of Haifa: prices have increased by 6% to 822,000 NIS (~$230,000) on average.
The Appraiser found no or little change when it comes to the largest metropolitan areas of Israel, noting the following price levels:
Tel-Aviv – 2,310,000 NIS (~$640,000)
Jerusalem – 1,614,000 NIS (~$450,000)
Beer Sheva – 623,000 NIS (~$175,000)
Haifa – 1,002,000 NIS (~$280,000) which represents a 2% increase in the past three months.
There are two main explanations experts offer for the leveling out of prices in the larger cities. First, that a large number of real estate purchases in these areas are carried out by foreign investors. These investors are directly impacted by the value of the American dollar. As it has weakened, their buying power has decreased. The second reason is related to rental rates. These rates have not “caught up” to the dramatic increase in house prices. Therefore the rental yield is going down causing a lower investment profitability level (because as the price goes up, the rental yield % goes down, making it a less worthwhile investment).
The Israeli Ministry of Finance claims there is and has been a steady, slow decline in prices, however the Government Appraiser’s new data shows this is not the case. Israel’s Central Bank Governor predicts a rise in prices, especially in rental rates, as investors are pushing to ensure they get the returns they are expecting.
If you have any questions or want a recommendation for a real estate agent or property manager in Israel, contact us.
