The Marker, Yael Belkin, 03.03.2021
"In the coming year, we will see an increase in double-digit percentages in the periphery. In the center, prices will continue to rise by a few percent, but the larger increase will be in the periphery," said Yigal Damari, CEO and owner of YH Damari ( -2.85 % 15320). ) "When you increase the price by NIS 200,000-100,000 for an apartment that costs NIS 5 million in the center, it means that the price increases by a few percent. But when the same numbers rise in apartments in the periphery that cost a million shekels, the percentages skyrocket, "he explained.
The remarks were made at a panel chaired by TheMarker's real estate editor, Yael Darel, at the "The Day After" conference hosted by TheMarker and Bank Leumi ( 2.3% 2164 ) , which deals with exit strategies from the crisis and its impact on the real estate and mortgage market. The panel was also attended by Yaron Rockman, CEO of Ashtrom Properties of the Ashtrom Group ( -0.94% 6418 ) ; and Dafna Landau, Head of Construction and Real Estate at Bank Leumi.
Broadcast of the conference
Damari went on to give an example from the past year: "In December 2019, I participated in a tender for the purchase of land in Ofakim. The tender included 1,000 units at NIS 110,000 per unit, including rights to employment and commercial areas of approximately 35,000 square meters. I was alone in the auction, I filled out a number, tossed a coin and won. 4-3 months ago in a tender with a similar size of land, the winning company already paid NIS 200,000 per unit - and that is a year apart. Demand is high and supply is low, there is a leakage of demand towards the periphery, and prices will continue to rise. "
At the beginning of the crisis there were various forecasts that housing prices had fallen, but a year later prices had already risen by 4% . According to Damari, the corona has actually led to an increase in demand for housing. "In April, at the beginning of the crisis, there was a fall. If every year in April we sell 60-50 apartments, in April 2020 we sold 15-14. We were in great apprehension. It was like a blow to the head that momentarily puts you in shock, you do not understand where you are. But in the end In fact, in terms of the company's strategy, we have seen that basically nothing has changed. In the real estate sector, and in particular residential real estate, the vision is for the long term. We have five-year plans and decade plans.
"It is true that there are many unemployed, but if we look at sectors like the public sector or the high-tech sector, these places were not harmed - on the contrary. Most Israelis were paid during the crisis, the only thing that changed was that they stopped spending money on flights abroad and restaurants, suddenly All the money in the bank. So the money accumulates, and at the same time, in the corona period one begins to understand the meaning of a house. "People who live in overcrowding, without balconies, suddenly see that the world is changing and do not know where it will go - so they prefer a roof, which is not a luxury."
"Rented housing is a very common thing in the world"
In recent years, one can identify a trend of private real estate companies - alongside government companies - entering the rental housing market. According to Damari, it is not certain that this is a particularly profitable niche for them. "The yield in the rental housing market is very low. If in the employment market you can find a return of 8% -7% and also 10%, in the housing market it is a return of 3%. We may get into this later, but in my estimation even if this area grows it will be minimal. I do not think that in the 20 years ahead more than 15% -10% of the apartments will be intended for rent. "
"I wish the State of Israel to have an institutionalized and supervised rental market," Landau says. "It will provide a solution for many young people who do not have equity for the apartment, along with companies that were almost excluded from this market - no new localities were built for Arab and ultra-Orthodox society. In addition, it could allow more mobility. For example, doctors could rent a house near the hospital where they work. "And when they move to another hospital, they will rent another apartment. Living in a service is a very common thing in the world because there is an institutionalized rent by large companies that run it in an orderly manner."
On the other hand, Damari argues that government involvement in the rental housing sector is leading to a rise in housing prices. "We also like that are in short supply it is so small and the demand is so great, and a little that the state takes a share of the land for the benefit of tenders for apartment rent. Created a situation in land prices in Israel continue to be crazy. Apartment to rent this bullshit, recently Housing and Construction ( -1.61% in 2016 ) Won a tender in Jerusalem and paid 30% -40% of the real value of the land. In the difference between the price paid and the value of the land they could finance apartments for rent to people for 10 years, so what is the logic? Price per occupant also created a problem. "On the other hand, they have increased the demand. How many young couples did not want to buy a house at all?"
There is no flooding in the offices
In the office industry, the picture looked less rosy, following the upheaval the industry experienced in light of the move to work from home. However, Rockman also claims that in an industry like real estate, the work is for the long term - and in Israel, even more so. "Even when I purchase land that has an existing plan, it will take us a long time between "Even when there are millions of meters planned, some of them are relevant for another 10 and 15 years. If you look at the population of Israel today, in another 20 years the population will double, these people will have to work and live in certain places."
According to Rockman, there is no flooding in terms of office space planning. "There are areas where there is a surplus, and areas where there is a shortage. There are authorities where there is a larger supply and it will take longer to absorb it. "And projects in the planning process, and we do not stop planning and moving forward. We do not lower prices, but where there was difficulty we helped. For example, when our shopping centers were closed, we did not charge rent."
The trend that is emerging today is a mix of uses, Rockman says. "The law of arrangements that has not yet been passed was supposed to create the possibility of converting some of the employment areas into residences, mainly because there is a very large demand for residences at the moment and want to regulate price increases. Its residents live a better life with the economic options available to it. Offices pay more property taxes than residences, and residences also place more burdens on the authority in terms of needs. There is an equation here that needs to be balanced. And residence.
"The Corona has accelerated processes in the office world. WeWork did not get up because of the Corona, it was eulogized but I'm not sure it's true. Flexibility, in the end we are supposed to provide our customers with the goals they want. "
Landau agrees with the statement regarding the need for flexibility. "We are a young country with a birth rate in all sectors, and together with the length of planning - we have received a built-in excess demand within the market," she adds. "Even the decisions of companies in commercial areas are not spontaneous decisions but long-term ones. However, such an exogenous event can change things. It is possible to allow shorter-term leases, or flexibility in utilizing the areas. In addition, remote work does not have to be work from home. For example, in the periphery, people may not work from home - but they will work close to it, just not from the office. This is something the government can take advantage of, as the largest employer in the economy. This is the state's place to contribute. "It brings life. The government can contribute to regulating demand so that it is more spread out across the country."