The gradual increase in interest rates is driving the Israeli economy crazy. In luxury areas throughout the country, some try to maximize opportunities at all costs. Real estate consultant Eddie Ben-Simon tells of a wild market that has lost control.
In just eleven weeks, the Bank of Israel has raised interest rates three times and now stands at 1.25%. Moreover, the expectation is that until the end of 2022, the interest rate will continue to increase by another 1.5 percent.
These changes affect the entire economy, especially the real estate market. The prime interest rate should continue to climb upward, which means that the mortgages of many Israelis will increase accordingly.
The effects of the latest measures are felt everywhere, including in the most prestigious areas. Adi Ben Simon, a senior real estate consultant who handles the marketing of properties in Caesarea, North Tel Aviv, Herzliya, Kfar Shmaryahu, Arsuf, and other places, says: “We are in a very challenging period in the real estate market. In the past two years, villa prices had jumped due to sellers who wanted to maximize the opportunity created during the Covid period, when many were looking to purchase properties with a large garden.
“With the food comes the appetite,” and there are those today who are trying to make an “exit” by selling the property they own, so villas that were sold until recently at prices ranging from 5 million to 6 million NIS are now for sale for twice the price.
Private plots have also risen dramatically in the post-Covid period. In Caesarea, for example, land that could have been purchased for around 2.5 to million NIS is now offered for sale at double the price. Considering that after buying the land itself, there are costs of construction, which can easily reach 4 million NIS, we get a final price of around 10 million NIS or more. Again, this trend did not exist before.”
Sellers shoot themselves in the foot
It is customary to say that the suckers don’t die but are only replaced. But, it seems that when it comes to luxury villas in Israel, this time, the potential buyers prefer to sit on the fence and wait.
Among other things is the change in global trends, with the recession hitting the US and inflation in England reaching up to the sky. These trends also impact what is happening in Israel.
From conversations we conducted with real estate consultants and economists across the country, we were surprised to find that not only global influences are thwarting or preventing the execution of real estate transactions these days. But also, the sellers themselves are “shooting themselves in the foot.” So we asked for Eddie Ben-Simon’s professional opinion on the matter as well: “Because of the uncertainty, neither side wants to lose, but while buyers wait for prices to fall, sellers want to maximize the opportunity because they too understand that from here on out there will be a decline.
I have seen quite a few cases where a sale deal failed at the very last moment after the draft contract was placed on the table and everything was ready for the final signing, only because the sellers felt they could press a little more and spend more money at the last minute, but in practice, this rarely happens.”
The rental market is wild
The atmosphere among real estate professionals in Israel is very reminiscent of the feelings of 2008, about a bubble about to burst in a few months. Those who will be especially exposed are those looking to sell a property and owners currently renting it at exorbitant prices. Real estate consultant Eddie Ben-Simon explains:
“Let’s take Or Yam, for example, a neighborhood that belongs to Or Akiva. It’s located very close to Caesarea, and the price of rent there has reached the threshold
Exceptional, to say the least.
Three and four-room apartments are rented at a price range of 8,000-10,000 NIS monthly. These are the same apartments for which, until not so long ago, owners asked for half the price demanded today, and I see these numbers in north Tel Aviv and Herzliya as well.
After in-depth research that I carried out, which includes the impact of rising interest rates, inflation, and similar past cases in Israel and around the world, it is hard not to see that this trend will eventually stop.
Those smart enough to recognize this already can make a decent profit, and those who don’t will find out later when prices are much lower.”
For more information about prices and opportunities for real estate transactions in prestigious areas in Israel, you can consult with Eddie Ben-Simon by phone:
054-470-16-16
