Contractor's nightmare can be buyer's dream come true
While some builders went under during the recession, many home buyers hit the jackpot with lower prices and higher quality.
In real estate, just as in life, one person's tragedy is in many cases another's golden opportunity. So alongside the major victims of the deep recession including contractors, suppliers, developers and other professionals who lost a large part of their capital and often had to close their business, leaving beyond heavy debts, there are also quite a few beneficiaries of the situation - first and foremost, the apartment buyers.
Higher quality building standards, declining prices, tempting offers and a large selection of products are only some of the changes that have occurred in the industry in recent years and have benefited buyers. The substantial decline in apartment prices during the recession years presented an excellent opportunity for buyers whose financial situation was stable during those years. In addition, a buyer in 2006 would not believe how much 1996 apartments seem outdated and simple in comparison. Today's buyer gets a much higher return for his money than home buyers in the 1990s did.
"In the past, a buyer would come to a site, ask a question or two and buy it, often when it was still on paper," says the director general of a construction company. "Today buyers come with a computerized chart after having received quotes from similar projects in the area, and negotiate over every section in the technical specifications. Contractors who are under pressure to sell apartments are willing to go very far to accommodate buyers - who are aware of their growing power and take advantage of it," adds the same director general.
In addition, contractors report that buyers often show up with an architect and lawyer in tow, to advise and escort them throughout the purchasing process.
Higher quality products
The buyers' first and primary benefit is the increase in what they get for their money. The erosion of apartment prices, which in some places plummeted by dozens of percentage points, enabled some buyers to acquire an apartment for a bargain price.
The overall recession did indeed affect the income of many citizens and their financial security, which prevented many of them from choosing to buy an apartment at that time. However, the situation of others remained stable, even then. The latter found themselves in a very fine situation given the recession in the real estate market, and many of them realized this was an excellent opportunity for them - which might not happen again any time soon - and decided to take advantage of the low prices to buy an upgraded apartment or a second apartment.
At the height of the recession years, when contractors were competing wildly for the hearts and pockets of every buyer, they were offering very tempting gifts and deals. There were, for example, some companies that offered luxury cars, a gift package of electronic appliances that include a home movie system, speakers and a computer and others offered as a bonus central air conditioning systems, state-of-the-art kitchens, contractors' loans at preferred rates, memberships in health clubs and holiday vacation packages abroad.
"The gifts did not prove themselves and in effect, are no longer considered an attractive benefit," explains Haim Kakon, the marketing manager at the Bonei Hatichon Civil Engineering and Infrastructures Ltd. "The buyers wanted to translate the benefit into cash and in the end it was not the decisive factor in the decision to buy the apartment. The best thing that happened to buyers is that the extras included in apartments was improved and this was reflected in the higher standard of finish in the apartments, construction of elegant lobbies and health clubs and saunas in the buildings for tenants' use."
The planning and design was also improved, regrading both the neighborhood and the standard of the buildings and the individual units, where apartment sizes increased and the environmental planning was enhanced. "In the past, most architects had a few standard sets of plans, so that on a given plot such-and-such a building would be erected. There was no in-depth thought or creativity," explains developer Reuven Cohen.
"Over the last few years, there has been an emphasis on interior design and planning to meet buyers' needs," says Cohen. "The developers realized this helps them a lot with marketing. It's easier to sell projects that are planned better." His company, Cohen Reuven, arranged focus groups before the start of a project it is building in Rishon Letzion to help choose the architect who is designing the project.
During the flourishing years, quite a few small contractors with no training or experience went into the business of building large projects. They sold the projects on paper and in practice offered a product that differed from and was of a lower standard than what was promised. The competition over these projects created unrestrained competition among contractors who offered building at low prices, while they were left unable to uphold their commitments and as a result many projects were dropped in the middle of construction or were completed with a low standard of construction.
In recent years, many construction companies went under, including some veteran and reputable companies, and along with them, the weak and inexperienced companies. Industry officials argue that the market in essence disengaged from a lot of "carpetbaggers" and that some good, strong and experienced companies such as Tidhar, Denya Cebus and Tzemach Hammerman today dominate the market.
Construction flaws have been a painful feature of the real estate market over the years. It may still be common, but here too, relative to the stories of prefab construction in the 1980s and 1990s, the situation is much better than it was. The quality of the work, especially in all the industrialized building, has improved considerably. At the same time, buyers have become more aware of construction issues and the number of suits filed against contractors over faulty construction has increased considerably.
Real estate agents
The recession led to a dramatic improvement in the real estate business and not just because the "carpetbaggers" who entered the market during the upswing gradually left when the market became tougher. Even during the boom years, realtors understood on their own that if they want their client base to expand, they must establish themselves and become more professional. To that end, an association of real estate agents was formed, which brought about the enactment of the Real Estate Agents Law, calling for licensing exams for real estate agents. While the real estate industry and the quality of the licensing exams still draws a lot of criticism, it is impossible to deny the considerable progress made over the last decade.