Increasing Prices Pushing Homebuyers Away from Tel Aviv
In 2022, an increasing number of homebuyers in Israel were looking for apartments in the peripheral regions, primarily in the south of the country, as the prices are considerably lower in those areas.
The data from the Central Bureau of Statistics (CBS) for the last quarter of 2022 showed that Tel Aviv and other regions in central Israel saw a drop in the number of deals demanded.
The data also indicated that as opposed to previous years, a greater number of buyers were interested in buying smaller apartments, which was likely due to rising housing prices.
There is a state of uncertainty in the real estate market. Prices have climbed to an all-time high, as the average price of an apartment bought in the last quarter of the previous year hit an average of NIS 1.96 million.
The average price of a four-room apartment in the same quarter stood at NIS 1.97 million. However, the public believes that housing prices have now reached their peak and they could see a sharp drop.
This is reflected in the reduced prices of new apartments and the falling number of deals.
There are a number of factors, which indicate that the sector has experienced a major slowdown like more expensive mortgages.
However, the average prices of apartments in different Israeli cities show that the prices for apartments bought in the last quarter of2022 were higher as compared to those in the previous quarters.
There could be two reasons for this. First, it is the decline in the volume of deals, which is just one component.
The second is a drop in price, but that has not happened as yet. The last two months did record a fall of 4.3% in the prices of new apartments that were bought on the free market.
But, there is an overall increase in prices, which shows that there is still a rise in prices in the market of second-hand apartments, which is about 75% of the market.
The mix of buyers is also considered another reason for the contradiction. The Bank of Israel conducted surveys on this aspect.
The results showed that due to the rise in interest rates, market buyers of apartments in the range of NIS 1 to 3 million have decreased, but it has not had the same impact on those buying apartments at higher prices.
Those purchasing expensive apartments have more resources and even with rising interest rates, they are able to afford mortgage repayments.
This is obvious from the fact that the prices of apartments bought recently are significantly higher than those that were purchased in the past.
But, this is not due to the fact that there is a rise in prices; it is because people are buying more expensive apartments.
The annual increase in the prices of apartments has reached 17.1% and this has changed the geographic mix of apartment purchases.
Purchases have declined in areas with high demand and those in the periphery have increased.