Ten months into the coronavirus pandemic, home prices continue to climb and sales remain brisk. But not all is well. Demand for homes in high-priced Tel Aviv and Jerusalem is falling as buyers appear to hedging their bets.
A survey of thousands of Israeli households conducted by the Geocartography Knowledge Group, led by Dr. Rina Degani, found that among those looking to buy a home, only 7% to 8% are now considering Tel Aviv, a decline of as much as 30% from 2010.
Demand for housing in Jerusalem was down, too, although by a much smaller 1.5%, to about 7% of all potential home buyers. The drop marked the end of 12 years of steadily rising demand for both cities, a halt that Degani attributed to the cities’ high prices.
With more people working from home and expecting to continue even after the pandemic is over, the survey also found that about 6% of Israelis have chosen to move to a different home and many of them want bigger properties so they have a dedicated space in which to work.
The coronavirus and the economic uncertainty it has created haven’t deterred home buyers, according to the survey. Only 15% of those surveyed said they planned to delay looking for a house to buy in the next few months until the worst of the pandemic has passed.
The only category that seems to have retreated for now are people searching for a bigger, better home (as opposed to first-time buyers). They account for just a quarter of the buying public, down from more than 37% before the coronavirus struck.
“The figures show that the market is stable, but only relatively stable because 15% of the buying public is waiting to see what the day will bring and is waiting to buy a house,” Degani told TheMarker.
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Despite double-digit unemployment and growing uncertainty about the economy, Israeli home buyers haven’t dialed down on their budgets and still plan to spend on average 1.4 million shekels ($440,000). That’s only 4% less than the average price for homes on the market, according to the Central Bureau of Statistics.
The four-room home remains the most popular for buyers, with 40% saying that is the size they are looking for. But demand for three-room properties has grown a lot, to about 27% of all home buyers – and for those buying in the pricier center of the country, to 35%.
Degani attributed growing interest in three-room homes to two contradictory trends. “On the one hand, the high cost of living and rising home prices … has boosted demand by young couples in small, less expensive homes. On the other, demand for three-room homes can be traced to the fact that part of the population is doing very well economically, so parents are getting their children off to a good start financially by giving them an apartment between university and marriage so they don’t have to rent,” she explained.
Gil Gurevitz, vice president for marketing at the developer Azorim, said that in addition to the classic buyer of three-room properties, young couples buying their first home, he was seeing a growing population of single-parents, often divorcees, as well as property investors spurred on by the reduction in the purchase tax last summer.
Based on what he has seen in the sales offices for one of Azorim’s major projects – a 355-unit project in Ramat Gan, of which 239 of the apartments are small – many buyers simply want to get a home that they can afford now out of concern that prices will start climbing sharply after the pandemic.
“They may not be sure about the economy, but they’re worried about rising prices, so instead of delaying buying an apartment they’ve decided to buy a smaller one. I think the demand for this kind of apartment will continue for the foreseeable future,” he said.