Home sellers beginning to lose confidence
Yad2-TheMarker index shows homeowners still raising their asking prices; but realtors say sellers are more prepared to show flexibility.
Despite the protests and tent cities, it appears homeowners continue asking more for their properties. The joint TheMarker and Yad2 website index shows that sellers in 20 of the 31 cities surveyed asked for more for their homes in August than they did in July. The index, however, reflects asking prices in the online classified ads, not final closing prices; and sellers, say realtors in several cities, seem more willing nowadays to bend on price.
Asking prices increased for all sizes of dwellings - rising in 22 of the cities for five-room apartments, in 17 cities for four-room apartments, and in 19 cities for three-room apartments.
The homeowners aren't subject to regulation, and the protests don't seem to have had any influence so far on advertised prices. It should be noted, however, that most of the owners are selling homes they occupy and, at the same time, are also shopping for new homes for themselves - so they are cautious about lowering their prices until they know the homes they want to buy are also being marked down. This, therefore, slows down the whole process of price movement.
Although asking prices are generally on the rise, their rate of increase is low. Prices of small three-room apartments rose no more than 1% for the most part. Bigger changes can be seen for larger homes: In Bat Yam, Ramat Hasharon and Herzliya they exceeded 3%.
In Tel Aviv, the average asking price rose 2.3% - to NIS 1.64 million for three-room apartments, and 2.6% - to NIS 2.94 million for five-room dwellings;, but they dropped 3.6%, to an average of NIS 2.03 million, among four-room units.
And although the general trend for advertised prices was up, Tel Aviv realtors see a different picture.
Kfir Zohar, co-CEO at Anglo-Saxon Tel Aviv, who finds that prices have stabilized and that sellers are even more willing to compromise than ever before, says this flexibility could manifest itself in 5% to 7% reductions from the listed prices.
"In Tel Aviv you need to distinguish submarkets that behave differently," adds Zohar. "Many people are looking for apartments priced up to NIS 1.5 million, meaning one-and-a-half or two rooms, where sellers show little flexibility. There are more fussy buyers than before in the range of NIS 3.5 million, where they expect large apartments with a parking space.
"The most pronounced trend of seller flexibility is for homes at the NIS 6 million level, where they are prepared to reduce prices by up to 10% to 15%," continues Zohar. "This range includes 150 to 200 square meter lofts, large high-rise apartments, and single-family homes in the northern neighborhoods. There is a considerable supply of luxury apartments, with many towers having been built and people having bought for investment."
Where is the market headed?
"The housing protest erupted in August, a vacation month with less transactions anyhow," answers Zohar. "If the situation stabilizes, there will be a new swell in purchases. I don't see any indication of a sharp drop, and expect prices to stabilize with about a 5% downward correction on average - but nothing beyond that because Tel Aviv still has a supply shortage."
Buyers sitting on the fence
How can the gap between the optimism exhibited by sellers on the Yad2 board and their readiness to compromise be reconciled?
"Sellers keep listing high prices but there are hardly any transactions," says Roi Harush, real estate consultant at Anglo-Saxon's Kikar Hamedina branch in Tel Aviv. "Some ads might be there just to test the market.
"People are sitting on the fence, thinking that if they wait, prices will drop," Harush continues. "But there are those looking for a specific home and there are no suitable properties, so I believe a good home placed on the market will be snapped up. I think we'll soon see a slight drop in prices, but I don't know what will happen six months from now."
Herzliya is one of the places where prices rose the sharpest in the last index - 2.5% throughout the city, with most of the increase stemming from five-room homes reaching an average asking price of NIS 2.3 million, some 4.7% more than in July.
In Herzliya, like in Tel Aviv, it seems there is also a gap between prices that sellers advertise and the prices at which deals are actually closed.
"Plenty of sellers are ready to lower their price," says Shai Feireisen, manager of an Anglo-Saxon branch in Herzliya. "There is a substantial difference between how much is being asked and what is actually happening. Sellers try for a high price but go through a sobering process and then lower it.
"We certainly see a huge drop in demand, definitely more pronounced than in previous years for August. The market anticipates prices dropping, with buyers putting off deals, and this leads to prices being lowered. Sellers who aren't willing to lower their price can't sell for a long period of time."
There is a basic assumption in the real estate market that people need to buy homes because they need a roof over their heads, but there are ways to avoid buying.
"People continue renting, as they cannot afford the high prices; so in my opinion, prices will go down," Feireisen says.
In Holon, asking prices rose 2% on average in August, with average advertised prices for five-room apartments reaching NIS 1.86 million - 1% higher than in July. Four-room units in the city were listed at NIS 1.53 million on average, up 4.4%. Brokers in Holon describe a situation similar to other cities, with asking prices increasingly diverging from market prices.
"We see this as a buyers' market," says Yaron Shamir, the ReMax Avenue concessionaire in Holon. "There are less buyers and they have more bargaining power. They sit on the fence and avoid closing deals, and sellers are forced to compromise a little on price."
What led to the trend reversing itself?
"It began with the social protest. Buyers nowadays are afraid to close deals because of anticipation of prices dropping, and it doesn't matter whether this happens or not," Shamir says. "People prefer to continue living in rentals or with their parents for several months until the situation becomes clearer."