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Real estate in the shadow of the Qassams By Ranit Nahum-Halevy Tags: rockets, israel, real estate The first Grad missile that fell on Ashkelon scored a direct hit on the real estate sector. Deals that were about to be signed were stalled, and buyers who did agree to continue negotiations demanded 10% price reductions. "Since the rockets began falling, a number of clients have called me, asking if they should move forward with deals," says Avigail Biton, a real estate appraiser in the South. "I told them, quite frankly, that now is not the time to invest. Why put their hard-earned money into something that is uncertain?" There is a fundamental conflict between the real estate market - which symbolizes calm, stability and faith in an unruffled future - and war and shelling. The Second Lebanon War paralyzed the real estate market in Haifa and the North, and not surprisingly, the real estate market in the range of the Qassams and Grads has practically ground to a halt since the recent escalation of attacks from the Gaza Strip. Advertisement Amnon Gelula, of Bayit Vegan Realty in Ashkelon, has had several important deals postponed. A group of investors from Britain, who wanted to buy land near the beach and build vacation apartments, decided at the last minute to keep their money in their wallets. "In the meantime, there is no decline in prices, but there is a real fear of frozen transactions," says Gelula. "I had two sales in the works, including one that was supposed to be signed a week ago Friday, but both sets of buyers decided to put things on hold. 'We prefer not to do anything until the situation clears up,' they said. One rocket was enough to stop everything." Until now, Ashkelon has enjoyed brisk demand along the shoreline and handsome 10% increases over 2007. One plot of land next to the beach, for example, zoned for a single-family dwelling, recently sold for NIS 1 million. 600-square-meter lots a little further from the beach are selling for NIS 650,000, compared to NIS 520,000 a year and a half ago. Foreign residents have been buying apartments in Ashkelon, and people have moved there from Sderot and Gush Katif, pushing up the demand for apartments, while the supply has remained unchanged. "New five-room apartments in complexes in the Barnea, Afridar and Neve Ilan neighborhoods cost NIS 720,000-850,000, while a year ago the same apartments did not surpass NIS 620,000," explains Biton. "Building plots in these neighborhoods are selling for $95,000, not including the infrastructure development. A year ago, they sold for $70,000. As of right now, there is no land available for high-density construction and prices are rising accordingly." In Netivot, which is closer to the range of the Qassams, the situation is no different. "When a Grad falls on Ashkelon, it is different than when one falls on Netivot," says Yakov Ben-Lulu, of Aviv Realtors in Netivot. "Ashkelon has more charm than we do, so the rockets affect people more. Even though the rockets haven't affected business here, we are afraid of the market freezing up." At present, a new four-room apartment in Netivot fetches $120,000, while a 130-square-meter villa costs $350,000. Many of Sderot's residents have moved to Netivot and Ashkelon in the last couple of years, renting or purchasing apartments in those locales, only to discover that the rockets continue to chase them. "The situation in Sderot is really difficult," say area residents. "Prices have not stopped sliding. In the past year, assets have lost 15% of their value. A 123-square-meter villa in Sderot on a 400-square-meter lot sold last week for NIS 450,000, when about a year ago the price would have been NIS 520,000. A four-room apartment sold recently for $75,000, while a year ago it would have fetched $5,000 more." "The most expensive villas in Sderot are selling these days for about $150,000," says Biton. "A year ago, they were priced at $200,000. The problem is that there are no transactions in this city; no sales or demand. I used to come here four times a week to make appraisals. Now I barely come once a week, and often that is for a property that has gone into receivership." Despite the current situation, a three-room apartment in Sderot's Neve Eshkol neighborhood sold recently for about $25,000, while a year ago it would have fetched about $30,000, at a shekel-dollar exchange rate of NIS 4.5. The apartment quite simply lost a third of its value. Today, apartments are being rented out to students at NIS 1,200 a month, reflecting an annual yield of 16%, a real record for the real estate sector. Still, the risk for both the real estate investor and the tenant are the highest in Israel for 2008. The economically strong moshavim (semi-cooperative agricultural communities) between Ashkelon, Netivot and Sderot have also been enjoying prices 25% higher in real terms, even though they, too, are in the range of the rockets. Thus, for example, a 3.5-dunam (0.87-acre) estate in Moshav Nir Israel, beside Ashkelon, sold earlier this year for $600,000. Building lots on nearby Moshav Talmei Yafeh cost $60,000 a year ago, and now they are selling for $120,000. Even considering the change in the shekel-dollar exchange rate, this is an impressive price increase. Houses on the moshav have been fetching about $350,000, up from $240,000 a year and a half ago. Moshav Sde Tzvi, about 10 kilometers from Netivot, has welcomed eight families from the Tel Aviv-Dan region over the past year. The first family purchased about three dunams of land for $200,000, while the last paid about $350,000 for a similar-sized lot. Moshav Tidhar, about five kilometers from Netivot, as well as the Hodaya, Gaya and Kochav Michael moshavim near Ashkelon, have likewise experienced a surprising jump in prices, after many years of stagnation in their real estate markets. Right when it appeared that some of the growth in real estate values from the center of the country was finally reaching the south, the hail of rockets began. Now the real estate market has retreated to the bomb shelters. It is hard to tell how it will continue in light of the continuing cross-border hostilities. The optimists can point to the recovery of the northern real estate market following the Second Lebanon War. Just a few months after that war ended, the market returned to almost normal. Pessimists, on the other hand, will tell you there is no certainty that the southern market will behave the same way, among other reasons, because unlike the war against Hezbollah, which ended with a series of understandings, everyone knows that the war against the Grads and Qassams is far from over. Bookmark to del.icio.us   State policy Olmert approves plan for 750 new homes in West Bank settlement of Givat Ze'ev. Sticking to his story Director of 'Jenin, Jenin' swears there are no falsehoods in his movie.   1.   This will get Olmert out of his coma 16:32  |  Proud Israeli 10/03/08   2.   Real estate value in all of Israel bound to go down 18:00  |  JIM 10/03/08

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