The gradual increase in interest rates in recent months has led the real estate market in Israel to a state of stagnation, and everyone wants to know how long this will remain and whether there is still anything to be done these days. To answer these questions and learn more about what is happening in the field, we turned to Eddie Ben Simon, one of the most prominent and essential realtors in the field.
All prominent realtors and real estate investors can do is nostalgically recall the post-Covid era. Then it was a hot market for buyers and sellers. But today, it is wilderness.
Is this a state plague, or is it a global trend? After the financial press and television news channels asked for his opinion on the matter, we also asked to speak with Adi Ben Simon, a real estate man knowledgeable in the field, and learn what it is all about.
The real estate market is sitting on the fence
“Despite our tendency to think that Israel is the center of the world stage, our economy depends first on what is happening in the rest of the world, especially in the leading and strongest economies of all, headed by the United States. Last December, the Fed raised interest rates in the US for the fourth time in the past year. This time it rose by 0.5% to 4.5%, the highest rate since 2007. The interest rate is expected to continue to increase this year as well. What happens in the US influences the rest of the world, including Israel. Traditionally, rising interest rates have a decisive effect on what happens in the real estate market. When interest rates rise, it becomes more expensive for buyers who need to borrow more money to purchase an apartment. At the same time, this impacts the property’s price, and no seller wants to sell at too low a price since, until recently, the same property was worth more. Therefore, a situation has been created in which almost all market forces are sitting on the fence.”
Longing for real estate activity during the Corona period
Many stormed the apartment market during and immediately after the Corona period, especially luxury homes in Israel. The lockdowns and Covid laws that kept citizens indoors made everyone want a piece of nature. Whether in the form of a huge balcony where you can sit alongside the birds or a large and luxurious garden with the surrounding vegetation. Is the luxury home market in Israel also standing still? “Yes. Although the luxury homes market is concentrated mainly in the country’s center and constitutes only 0.5% of the general real estate market, today’s trend is the same. There is less demand for luxury homes, and prices are stuck. You mostly feel it in assets worth ten million shekels or more,” Adi Ben Simon explained.
Real Estate Out – Bank Interest IN
According to Adi Simon, Israelis have stopped being suckers. Instead of paying any price for properties for sale on the market, they began to turn to alternative options. Among other things, what the banks offer. In most banks, it is possible today to receive between 4 and a half to 5 and a half percent interest as part of savings plans. Such an interest rate was not in reach for many years, so the liquid money no longer reaches real estate investments.
Those who mostly feel this in their pockets are the various construction companies and contractors who have purchased large tracts of land and marketed housing and commercial projects. At the moment, they stand like white elephants.
Thinking outside the box
The question arises about how to get through the crisis and what real estate agents are doing now, just sitting idly by until interest rates begin to fall?
Despite the global and local crisis, Eddie Ben Simon, who specializes in brokering Villas in Caesarea, Herzliya Pituach, and Kfar Shmaryahu, does not give up for a moment or stand still. He manages to find local and foreign buyers for the properties he handles and executes transactions, and that’s not all: “The question is not only when the interest rate will fall, but also how the new government, especially the Shas party, will act. The party has already put on the Knesset table a proposal to change the nature of the commission payment of real estate agents in Israel. This is a fee of 1% on each side. This section raises a question mark regarding practitioners in the field. That’s why I recommend everyone think out of the box and consider the future. Therefore, beyond my activity regarding luxury properties, I also work on other fronts, commercial real estate, offices, and hotels, channels that are very relevant these days,” Adi Ben Simon concluded.
