How My Clients Can Beat the Jerusalem Supply Issue
(These are the thoughts of CapitIL Real Estate Agency Sales Director Ben Levene. This article is based on market experience, not statistical data).
Everyone knows that it is hard to find “tick all box” apartments in Jerusalem at affordable prices. There is one option, however, that I suggest to people who are really looking for something specific and who are on a tight budget.
This doesn’t work for everyone, but it could possibly work for you. This solution is buying in a new project just as a permit gets issued, or even a bit before the developer receives the permit (with a limited get-out if the permit gets significantly delayed).
Let’s dive into why this may solve your Jerusalem property search issue.
Why Purchasing Pre-Permit Benefits You
If you purchase before the permit, make sure there is a get-out clause. You do not want to end up stuck in a project that gets delayed for years. If buying a pre-permit can be a risk, what is the advantage of buying before the permits are received?
If the developer is getting financing or using a bank guarantee (highly recommended), then the developer must meet the expectations that the bank (or another funder) sets for them. This means that the first few deals the developer makes are extremely crucial to the developer, and he will be more willing to negotiate.
This does not mean that the price can be negotiated to under-market value, however, there will be a bit more room to negotiate a fair price. Therefore, if the apartment will be marketed at 6.3 million shekel when the pre-sale starts, you may be able to purchase it at around 6 million shekel before marketing officially starts.
The start of the project is the perfect time to jump in because once builders have already sold half the building, they are in no rush to sell the rest of the project, and will wait until someone is willing to pay their asking price without any negotiations.
Before sales have technically even started, developers usually are a lot more willing to negotiate prices, as these sales are crucial to their financial funding.
Best Bang For Buck
For anyone who is looking to purchase a tick-all-box apartment for a great price and is in no rush to receive the apartment, I highly recommend considering a project in its very early stages.
Other advantages besides the ability to negotiate pricing are that you will be able to be involved in the process and have a say in the finishings from the start.
If you are someone that really wants a 1300 SQFT balcony, but cannot find an apartment because your budget is 1.85 to 2 million USD and not 2.5-million USD plus, your best option may be to purchase a pre-permit or the very early stages of TAMA 38 projects, or new builds and negotiate a good price.
Timing Is Everything
For people who are not looking to wait 3-4 years for their apartment to be finished or do not want to take the risk of being held up in a project, that is entirely reasonable.
Unfortunately, the Jerusalem market requires a balancing act and you will have to compromise between budget, ticking all boxes, and the construction timeline.
What You Should Be Doing As A Client
Sometimes we are not able to advertise these specials including pre-pre-sale deals, but we can send them privately to clients. This is why it is crucial to be in touch with me at the start or even before your search not just when you see a property that interests you, but rather right when you start your property search.
This will allow us to have an eye out for you when relevant opportunities arise that cannot be marketed publicly.
Buying in a project is only for some, but if you do decide to jump in, make sure you surround yourself with a group of experts to ensure a successful purchase.
If you have the right agent, lawyer, and designer/project manager to help you, buying into a project is potentially a realistic option.
Each project is different, and every client is different. It is important to discuss different aspects of the project and your needs with professionals that understand the nuances of each situation.
There are advantages and disadvantages to every situation, but if you want to buy at competitive prices in the market, buying in the early stages of a project could be your best option.
Historically, the prices of builds increase significantly over the construction period, making your return on investment quite good (obviously, every case is different but this is the general trend that we see in the Jerusalem market.)
For people who are not in a rush and are not stressed about going through the building process, buying in a new build from its early stages could be the right decision for you.