Increasing Demand for Israeli Homes: Huge Foreign Market Says It’s Become a Necessity
There is a growing demand for Israeli homes, particularly among American Jews who can afford to buy one. This phenomenal rise in sales from overseas buyers is attributed to Israel is seen as a haven amidst the uncertain political climate in America. According to Tzvi Shapiro, First Israel Mortgages co-founder, these buyers once regarded having another home in Israel as a “nice thing to have” and a luxury more than anything else. However, they have now shifted from buying out of luxury to purchasing out of necessity.
Shapiro says that his overseas buyers still favor popular “white” neighborhoods in Jerusalem such as Rehavia, German Colony, Beit Shemesh, and Katamon. There are also increased demands in the burgeoning cities of Tel Aviv and Ra’anana. Shapiro also says that his clients are leaning towards properties that are still being constructed. They choose to purchase these projects because they are assured that they have as much access to information as those who are on the ground.
Shapiro further notes that while they have concentrated on American Jews from the US East Coast, particularly the Tri-State area (New York, New Jersey, Connecticut) and Miami, his company has seen significant growth in buyers located on the West Coast, especially from California. This is surprising because, in the not-so-distant past, American Jews from that part of the US have not expressed a lot of interest in purchasing homes in Israel. Well, they are very interested now. Some of them are looking at homes in Jerusalem, while others prefer to settle near the beach.
This year seems to be the best time to purchase a home in Israel as the stock market is at an all-time high. According to Finance Ministry data, real estate agents were able to close sales on about 13,400 apartments In December 2020 alone. This is staggering data accounts for the third-highest transactions in Israeli history. What made it even more impressive is that all these happened while the whole country was in lockdown for half the month due to the COVID-19 pandemic.
2020 was a roller-coaster ride for the real estate market in Israel. After the bottom dropped out during the height of the coronavirus scare from March to June, it was able to recover, with 62,000 homes sold in the latter half of the year. This holds the record as the highest sales volume in the country in the last 20 years.
Due to the lack of housing facilities relative to the size of its population, Israel is one of the most expensive real estate markets in the world. A recent study published by Australia-based price-comparison website CompareTheMarket revealed that the average cost per square meter of Israeli housing space is 26.6% of the country’s disposable income. This is the second-highest figure in the world. According to Shapiro, Israel Land Authority is not moving fast enough to make new land available for building. As a result, not enough new properties are being built in the country. The solution says Shapiro is “for government to change its whole approach in how quickly land can be made available.”
Now that the panic that COVID-19 brought is gradually diminishing, a new surge of local buyers is expressing interest in the real estate market. Mindsets regarding property values are changing. Shapiro says that local buyers who expressed that they will wait to invest in properties when prices go down are realizing that prices are not likely to decrease. Many are anticipating the opposite: prices are seen to further increase in the future. Shapiro says that the Bank of Israel should allow larger mortgages.
Even though the average household income has increased for an Israeli household, they still can’t afford a down payment on an apartment. Shapiro suggests that instead of the 70% to 75% financing permitted now, first-time buyers should be allowed to finance 90%-95% of the home. They should also bring in a private insurer that would assist in alleviating the financial risk involved in this scheme.
In the meantime, well-to-do overseas citizens keep coming in droves, even though they are limited to mortgages of 50% of the price. Shapiro says that the message is clear: They have to start building quickly because prices will continue to soar.