Israel attracts foreign property buyers with a warm climate, a fairly high standard of living and medical care. Among other things, for Russians, the absence of a visa barrier has recently been important.Of course, real estate is bought primarily by those who associate the future of their family with this country, who plan to live there or conduct business. However, investors are looking towards the Jewish state. They are tempted by the rise in prices, which has been happening in the country for a year and a half, and the opportunity to lease their property.
Reasons for growth The main reasons for the growth in the Israeli real estate market are the low mortgage rate and, of course, the stability of the country’s economy and banking system. Since 1999 the number of finished apartments in new buildings and the shortage of land suitable for development are warming up the market is record low – the country is small. The global crisis affected Israel in exactly the same way as Europe. “In 2009, foreign citizens purchased 13% fewer apartments than in 2008, the total number of foreign buyers decreased by 19%,” says Elena Yurgeneva, director of luxury real estate at Knight Frank. – According to the Ministry of Finance of Israel, during the period, foreigners bought 2.8 thousand apartments with a total value of 802.7 million euros. One fifth of them were premium class apartments. ” The reduction in the number of purchases of apartments by foreigners was primarily in such cities as Netanya and Rehovot (34–41%), and the greatest activity was noted in Jerusalem and Eilat. However, after a rise in prices of 21.3% (year on year) in the fourth quarter of 2009, according to the results of 12 months, from June 2009 to June 2010, the increase was only 15.9%. There is a downward trend in price increases. Nevertheless, the situation is now more than happy. For comparison: in Europe, the correction for the same year was minus 8%. Now in Israel, prices are 21% higher than they were in 2006–2008. In addition to economic factors, political events have a significant impact on the Israeli real estate market. Thus, the invitation of Israel to join the Organization for Economic Cooperation and Development in May 2010 increased the optimism of buyers and investors. And the conflict between the Israel Defense Forces and the humanitarian courts of Turkey, on the contrary, had a negative impact on prices and investment prospects. Promised Property The most expensive real estate is located in Tel Aviv, on the first line of the sea, on the Yarkon city embankment, where prices start at $ 10,000 / sq. m. And the minimum cost of housing in the new building – 7 thousand dollars / sq. m. m. “The cost of a good four-room apartment with a parking space, storage room and a large loggia will be from 560-600 thousand dollars. This high cost is due to the fact that Tel Aviv is the business, cultural and social center of the country,” explains Stanislav Zingel, President International Real Estate Agency Gordon Rock. According to the expert, in the nearby Tel Aviv cities – Ramat Gan, Givatayim – you can buy an apartment in a new building a little cheaper, at least for 480-500 thousand dollars. In Rishon-Le-Zion prices are slightly lower – 400-420 thousand dollars In Netanya, housing is already 30% cheaper than the capital – 3-3.5 thousand dollars / sq. M. m In Haifa, you can buy a good four-room apartment for $ 280–320 thousand, and in Jerusalem, an apartment of 100 square meters. m is from 340 thousand dollars. “Basically, the real estate market in Israel is represented by apartments. However, it happens that there are proposals for the sale of private houses in the center of Jerusalem. The price of such an object usually starts from $ 1 million, – says Andrey Kuchin, CEO of Prime Time Realty. – If you do not have the funds to buy real estate in major cities, we advise you to pay attention to small ones, such as Tiberias, Safed and Kiryat Malachi. There the apartment will cost 40 thousand dollars. ” Especially for investors in Israel, there are projects of residential complexes and apartment hotels with a guaranteed yield of about 5% per year. In this case, the owner does not bear any costs for the maintenance of real estate, everything – and maintenance, and in some cases the necessary repairs – are performed by the management company. “Such projects exist in Tel Aviv, Herzliya Pituach, Netanya, Eilat. The owner can spend up to 90 days a year in his apartment, receiving the service of a five-star hotel and additional income, ”says S. Singel. Rent such housing tourists or pilgrims, as well as those who work in international companies whose offices are in Tel Aviv. Domestic rental demand is also there, but small. For example, in the prestigious district of Tel Aviv for $ 480,000 they sell a spacious duplex on the sixth and seventh floors of an eight-story building. The area of the apartment is 101 square meters. On the ground floor there is a kitchen, a lounge, a bedroom and a small living room, on the upper floor there is another spacious bedroom and a large terrace of 40 square meters. The apartment is furnished and fully equipped. In a no less prestigious area of the city is a six-room penthouse located on the fifth floor of a five-story building with an area of 230 sq. M. m worth 1271 thousand dollars. From the living room you can go to a large terrace, where there is a place for a barbecue and a Jacuzzi. The price includes two parking spaces. For an amount of $ 312,000, you can buy apartments at a five-star apartment hotel in Netanya on the Mediterranean coast. The apart-hotel, which has an extensive infrastructure, down to its own synagogue, is managed by an international hotel chain. Apartments are fully furnished and equipped with household appliances. “The projected income from the lease of this object is up to 7%, the guaranteed profit is 4% for three years. A mortgage of up to 60% is possible, ”says S. Singel. Another example is the perfectly located four or five-room apartments and penthouses in the new complex in Haifa, with good transport accessibility, next to which there are many educational institutions. Apartments are rented with a complete renovation, with built-in kitchen units and fully equipped bathrooms and toilets, with elements of the “smart home” system. The cost of apartments with five rooms is 180 thousand dollars, penthouses with four rooms – 500 thousand dollars, with five rooms – 553 thousand dollars. Mortgage going up Real estate in Israel is equally accessible to both local residents and foreigners. “In order to take a mortgage loan, it is not necessary to have citizenship, it is enough to prove one’s solvency,” says A. Kuchin. – Banks provide mortgage loans at an average of 5% per annum. If you take a short-term loan (up to five years), you can give it at 4%. If the money is issued for 20 years or more (the maximum period is 32 years), the percentage is higher. ” According to S. Singel, due to low mortgage rates, the demand for loans grew by 20% only in 2009, and the average mortgage amount for Russian buyers is $ 160,000. Affordable mortgages have helped many Israeli families to strive to improve their living conditions. Fearing the uncontrolled growth of purchases on credit and, as a consequence, the creation of a bubble, the Bank of Israel tightened the rules for granting loans. New guidelines have been issued to strengthen the verification of potential borrowers. In addition, in the summer of 2010, the Bank of Israel increased the discount rate by 0.25%, bringing it to 1.75%. This means that the cost of mortgage loans has increased by approximately 3% since August. People who have taken a mortgage in the amount of 135 thousand dollars for 25 years will now pay 650 instead of 635 dollars / month, and those who have taken 700 thousand dollars will pay 1,305 instead of 1,270 dollars. Nevertheless, banks calmly responded to the increase in the discount rate. The fact is that loans were issued at a floating rate, and borrowers who took them during a period of relative cheapness were warned that the discount rate could rise at any time, and in accordance with this, mortgage payments would also increase. “The main motive behind the decision of the head of the Bank of Israel, Stanley Fischer, is to increase the rate – the intention to stop the rise in prices for apartments, because in view of the cheapness of mortgages, people rushed to invest money in real estate, which led to a sharp jump in demand for apartments in a situation of limited supply,” says E. Yurgeneva . Since there is a clear tendency for mortgage to become more expensive, potential buyers who rely on it may need to hurry.