Anyone who has kept track worriedly of the state of real estate prices in the past year knows that they have shown a drastic increase of 15.2%, one of the most significant increases since 2010! True, the government announced that it intends very soon to provide a response to the issue in the form of changes in real estate taxation, but now that the government is going through an upset once again, it is unlikely that now, the promises will be implemented. It is much more likely that once again, we will be required to stand by and watch how the field that is so costly for all of us is neglected and breached. What are the implications of this situation, and who stands to profit from it? We have investigated the subject!
When the opposition is in the picture, there is not much room for hope
The current situation is such that the government has lost its majority. Thus, if we look at what can be learned from political history, we can conclude that it is not possible to rely on the support of the opposition in passing and promoting programs born in the coalition’s domain. So that, if there once was hope regarding the programs of the Ministry of Housing, Ministry of the Interior and Ministry of Finance, in view of the current political situation, this hope is gradually crumbling.
Rise in construction inputs
The political map is not helping to help moderate the increase in prices, and at the same time construction inputs are triggering quite a storm: they have been on the rise for quite a while, and to be precise, prices in this sector have increased by 6.6% during the past year. Therefore, those who bank on continued price increases will probably emerge on top. So, if you are thinking of purchasing a property for the purpose of real estate investment, it is definitely an opportunity worth seizing with both hands, but if we relate to most people, we will find that many couples face significant difficulties in fulfilling their dream – to move from rental to purchasing an apartment, a fact that indirectly serves property owners (enables them to raise prices).
A glimpse of apartment prices
Want a glimpse of apartment prices? Well, an in-depth comparison suggests that only in the past year have apartment prices increased significantly all over the country, as per the following regional breakdown: an increase of 2.4% in the center of the country, 1.6% in the north of the country, and 1.5% in the south of the country, while Tel Aviv itself recorded the lowest increase – just 1.3%. However, if we look at what happened to the prices of new apartments in the past year, we will find a much more significant price increase, an overall increase of 17.8% in just one year!
Standing in one place coupled with another round of elections
If we make some order in matters, we will find that prices are continuing to soar, while the government that may get involved in general elections for the umpteenth time (we have stopped counting) will not be able to afford to allocate dedicated budgets for addressing the problem. So, this explains how the political situation prevents achieving any desired change in the near future, but perhaps we should raise another question: how did we get into this situation? Well, it should be understood that we have been without a functioning government
for about three years, a fact that, among other things, has severely impeded the implementation of supportive measures.
Government stability is required
In order to get out of this situation, which is detrimental to most of the population, there is a need not only for programs, but also for government stability, stability that could enable the redirection of budgets and promote smart reforms, activities that we have not been privileged to benefit from in recent years. What indeed has the current government achieved until now? There were attempts to increase the supply of apartments, in the understanding that the smaller the gap between demand and supply, the lower the prices of apartments would become. But to implement this takes time, perseverance, and most especially, less political fluctuations, when considerations of power come into play.
As demand grows steadily by 2%
In general, it would be fair to say that every year, about 50,000 new apartments need to be added to the apartment market, since every year demand increases by about 2%. What does this mean in practice? That in the near future prices will only continue to climb. Why? It is because, demand is difficult to control (although here too the government made a good start with the ‘price per occupant’ program), and at the same time, it is difficult to control supply that continues to be quite static.
A little encouraging news
Despite the unsettled political situation and the numerous difficulties that have been our lot over the past two years due to the coronavirus, it is encouraging to know that nonetheless, we are on the right track. As evidence of this, we note that this year there have been a fair amount of construction starts. However, as things stand on the ground, one cannot bank on an ongoing construction boom. Building contractors warn of cost increases in raw materials and in labor prices, so that without a systemic response, a realistic prediction would be a significant slowdown in the field, and as mentioned, a slowdown alongside a shaky government is far from a promising formula for the real estate field.
Apart from the investors, everyone comes out losing.
In conclusion, it would be no exaggeration to say that we are in the midst of the biggest housing crisis in all the years of the construction industry. When we add to this the fact that a sizeable number of contracts did not take into account the increase in prices, then the main losers of the current crisis are not only those who dream of purchasing a home, but the contractors too.
