Analysis of the Jerusalem Market End of April 2022
With tourists returning over Pesach and prices still being extremely high, there is still a lot of market activity carrying on.
The main question is whether it is going to stop. The Israeli government would love for the market to slow down.
Over the past 6 months the government has taken a few actions to try to push its agenda:
1) Raised purchase tax up to a minimum of 8% for foreign buyers.
2) The Bank of Israel has raised the interest rate by .25% and the estimate, although no guarantee, is that it will move up another 1% during this calendar year.
3) There is talk about penalizing owners of Airbnb and preventing short-term rentals in order to prevent empty apartments and holiday nests. No actual decision seems to have come out yet.
All these actions beg the question of how this will affect the market.
Is it going to slow down? Is it going to bring prices down?
How This Affects The Market
Of course, no one can say for certain, however, Ben Levene, CapitIL’s Director of Sales has a few thoughts about how this will all play out.
According to Ben, none of these actions so far are going to dramatically increase the supply, which is the only way he can see prices reducing.
The biggest thing they could do to affect prices in the heart of Germany Colony, Baka, Rechavia, would be to build hundreds of new units etc.. If they are unable to increase the supply there (and it is a hard task, nearly impossible in Ben's opinion,) they will struggle to bring the areas most of the readers are looking for down in price.
Remember, in terms of the taxes, purchase taxes existed before, there is only an increase in percentage. In order to bring down the market price, they would need to reduce the demand by 70%-80%.
Without drastic action being taken, that will not happen, and the markets will in Ben's opinion struggle to slow down. Perhaps these actions are slowing down the periphery markets, but that is not really going to affect the foreign Jerusalem market, and so in Ben’s opinion he does not forecast a drop in prices.
How This Affects You
Ben had the pleasure of going out and showing apartments to many people over the Chag. There were many serious buyers, some desperate to seal a purchase and those who were willing to take their time in purchasing, which is completely fair- no one should be rushed into anything with such a big purchase.
But Ben would say, and he has told this to a few buyers: He has met many people who have been looking on and off for 5-6 years, and they say, “If only we'd bought 5-6 years ago.”
Ben is going to reiterate now, although no one is a fortune teller, he does not think you are going to want to be sitting there in 5 years without a property if you truly want to own a property here in Jerusalem.
Ben’s prediction is that you will be sitting there in 5 years wishing you had bought it 5 years ago instead of waiting.
In fact, Ben and his family just moved; they decided to upgrade their housing considering he saw an opportunity and realized two very important details.
One, it was a good opportunity for the market. And two, more importantly, he realized that mathematically to afford this in 2-3 years, may be out of their financial reach by that time. Ben would say to anyone reading this who is looking to buy a holiday home, or is looking to spend half their time here in Israel, though it sounds expensive, understand that it might sound a lot more expensive in a few years.
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