Is the real-estate investment sector dead or just ill? Perhaps it is waiting for better days? A survey conducted among 450 property investors in February-March by Ewave Nadlan, a specialist in real-estate project initiatives, may shed some light on the sector’s mood. In general, the survey indicates, investors are wary of the steps the government has taken, preferring to wait and not rush to sell assets on a large scale.
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In recent years, the government has acted to distance investors from the real-estate market, based on the assumption that they are responsible for the rise in the cost of housing. Taxes were raised, in particular Finance Minister Moshe Kahlon’s increase of purchase tax. His introduction of a bill to tax owners with three or more homes is now being appealed in the High Court of Justice.
Finance Ministry reports do indeed show a significant drop in home purchases by investors, and a concomitant sale of ones they own. But it raises questions: What are the investors really thinking? And are we seeing the beginning of the collapse of the real-estate investment sector in Israel?
The results of the survey show that such a scenario is a long way off.
A decisive majority of respondents did not foresee a drop in housing prices this year: 43% predicted a rise, 46% believed the prices would remain at their present level, and only 11% expected a drop in prices.
Ewave Nadlan’s Asaf Kahaner talks of “a hard blow for the Finance Ministry, which in recent months has published data and assessments to [suggest] a cooling-down of the market.”
Yet by the same token, most investors do not believe there will be a rise in housing prices – a view that contradicts surveys conducted by the management of real-estate firms in past years.
The survey went on to ask investors whether they intended to purchase additional housing, to sell property, or to wait. Although 58% indicated they would wait out the year and see which way the market moved, 32% said they would continue to invest in property, while 10% were looking to dispose of their assets. The survey looked separately at the “heavy’ investors” – those with at least 1.5 million shekels in ready cash. Of this group, 52% will wait and see, 36% will continue to buy and 12% expected to sell.
Kahaner points out that many investors in the survey are planning immediate purchases of real estate, despite Finance Ministry data about a downturn in the real-estate investment market.
“The public is still trying to understand the government decisions, and how they affect the market and themselves personally. People are not rushing to sell property,” says Kahaner.
With regard to the differences between heavy investors and investors in general, Kahaner notes that a higher proportion of the former is interested in purchasing real estate in the immediate future. “The activism of that group is instructive,” says Kahaner. “Real-estate investors have not yet had the last word. We can see that from their purchases this year.”
However, it is also the case that the proportion of heavy investors interested in selling property this year is higher than that of investors in general. In other words, heavy investors are more determined than general investors to remain active under complex market conditions, a tendency that is reflected in both directions – buying and selling.
Another question related to the motivation for investing in real estate abroad. Of the investors, 22% had looked into it and intended to invest; 21% had checked, but found it did not suit their needs; 26% had not examined the option but considered it a possibility; and 31% were not interested in the option at all.
“Just recently, the economy minister sharpened his tone in talking about real-estate investors, calling on them to go invest in London and Berlin. A growing number of investors are considering just that, but a word of caution is needed here,” says Kahaner. “If their readiness and intention [to invest abroad] is realized, it won’t be a problem of real-estate investors alone, but of the [entire] Israeli economy. The relevant government ministries should tone down their statements, and certainly not recommend sending available funds abroad.”