The Marker, Hadar Horesh, 06.04.2020

In recent weeks, the corona crisis and economic distress accompanying it appears that Israel's housing prices fall - even if there is still enough transactions to prove it. But Professor Danny Ben-Shahar, chairman of the Real Estate Research Institute Elrov Tel Aviv University, believes that even the global crisis will not lower the price in high demand areas.

In an interview with TheMarker Ben-Shahar explains the reasons why, and lays out his prediction Israeli housing market, as well as commercial areas and shared work spaces.

Housing market froze. What happens when transactions resume?

Ben-Shahar: "the housing market construction has side demand side supply. On the supply side there is a drastic decline in housing starts and completion of construction. It will hit the supply of the medium-term. There is a significant fall in the industry, it is unclear what will be the duration of the crisis, but it can roll on because of a shortage of workers and raw materials. I appreciate that plague the housing market exit anniversary by demand. Although there is damage to public revenues, will affect purchasing power, but we must remember that every year they are joined by some 50 thousand households in need of shelter. "

Tel Aviv Rica Photo: Tomer Appelbaum

We have seen in the past homebuyers can also postpone the purchase of the apartment, and the demand is not coming holidays viewing.

"This is not about gaps in times of significant and buy they postpone their entry, will eventually market. Awakening housing demand is mainly linked to what happens in the labor market. If the economy does not recover quickly from widespread unemployment will be longer until the apartment market will recover. I believe that most employees return to work after the crisis, but others will take longer and unemployment still remain systemic smaller the slower process. "

Way may be wiped out part of the production capacity of the new apartments. Some contractors will collapse?

"In the medium and long term question is which companies will survive the crisis. How developers will pay for themselves in a period of decline in revenues. Companies preparing for a rainy day will survive and went out from the recession fairly quickly. From experience of past years can learn that there are companies who behaved greater responsibility and taking fewer risks, and were such as ".

So anyway you appreciate happen to housing prices?

"At the moment difficult to talk about prices that have almost no deals. It is true that a decrease in the number of transactions always comes with falling prices , which is what seems likely at least in the short term - but I do not believe in areas where high demand seems to falling prices. Area of Tel Aviv, for example, excess demand in major very, and therefore also in crisis prices will not fall. the decline in prices will be in the periphery. Further, the demand will rise because as I said there is a constant increase of the population and people need place to stay. "

Tel Aviv empty because of the crisis corona Photo: Tomer Appelbaum

The rental market confusion. We hear of landlords that it was trying to raise rent to tenants weak.

"Clearly there is a difficulty of tenants many pay rent and they depend on the willingness of landlords to come for them . I do not appreciate that looked increase of rent for the long run. If I rent an apartment and the tenant was asking to postpone some payments, I would go with the arrangement. But beyond the responsibility and mutual responsibility has economic factor: housing tenants who have lost sources of income simply can not pay, at least temporarily. landlord has no alternative, therefore deferral of payments it a reasonable solution . "

"Banks will have to meet the borrowers'

What is clear is perhaps less obvious apartments landlord banks raised their mortgage rates once the crisis erupted.

"The reason for the rise in interest rates is the increased risk. It is clear that the situation is causing an increased risk that banks will not be able to collect the full credit given to, and interest rate reflects the change. This does not contradict the localized treatment of borrowers who find it difficult to meet payments coming months and require payment in installments. Banks will have to come to meet them - not just because social responsibility, but also for professional reasons. no one wants to start now seize assets because of delays in the payment, and it is not worthwhile: this is not a good time to dump the apartments bailiff. "

If the banks reject collections they may get into distress in front of their own lenders.

"For this reason the government should be party to the arrangement. If the banks have raised from the debt it needs to redeploy it, if funds were raised from other lenders - banks need to reach an agreement with, if necessary. No one wants to see the crumbling banks these days."

Empty business in Tel Aviv this week Photo: Moti Hillerød

The collapse of banks is a horrible scenario examined by the Bank of Israel, but it is hard to believe.

"The right thing to do is to give deferral of payments to households. Even the government has become a party to that case that the money came from the Bank of Israel, or from other sources - it would drag on even side from which the banks raise the money. Nobody wants to see this market collapsing. In terms of stability of the banks the question is how much of their loan portfolio diversified. the concern is the collapse will be in many places at the same time, rather than one sector. it is a horror scenario, and this may happen if the crisis would last. required the intervention of the central bank and the government. "

Companies taking risks may crash

What will happen to companies that rent a commercial space?

"Companies large and stable will this crisis. Even they, like banks, should go towards customers and to defer payment of rent to customers good they were fresh again after the crisis. But there are companies taking risks and bet on large loans. When the cash flows will decrease it turns out they do not comply with the covenants for loans, and will crashes ".

What about the feeling that the valuations of assets swelled in the pre-crisis?

"Recently, we saw the valuations of the assessors were revised upward based on yields down. I expect yields will rise. In recent years we have seen a rash of warehouse area, and I do not see a drastic change in this crisis."

Let Ganei Yehoshua in Tel Aviv against the background of office, last week. "Natural experiment created work from home ' Photo: Ofer Vaknin

Many have rediscovered the possibility of working from home and the office may remain after closure.

"This crisis may be a huge natural experiment blockade that nobody could do it in the lab. It's a natural experiment in the field of working from home. It is clear that it is not suitable for all industries, but in some areas it could change the face of the industry and save a lot of demand for real estate. All the people divide their time between the two spaces - home and work. At one time use, the other empty. You can save a great deal if we use all the time one of them. You may call centers find work much more efficiently when the agent is in the home ".

Companies offer shared work spaces will continue to be a hit?

"In the short term these spaces will be the first low, this is a very dangerous area because of the uncertainty and short-term rental. But the business practices of companies working spaces is more similar to real estate and service companies, are more similar to hotels and less to the leasing of offices . Crisis may actually increase the demand for such companies in the long term. Some tenants will return to work from home or find that they have no need for short-term rent. "