The residential real estate market was at a standstill in August 2011. August is in any case a traditionally slow month for sales. This year, it was also a month of social protest, government committees and declarations, which raised hopes that prices would fall, causing people to delay purchase decisions.
Even so, anyone who believed that there would be a collapse in price of homes in areas of high demand must be disappointed so far. Data from the Homeless classified ads website show that sellers apparently decided not to try to attract at any price the few buyers seeking bargains in the market.
Prices for four-room apartments in Tel Aviv were stable. While the average price for a three-room apartment fell 2.4% in August, it was still a whopping NIS 2.14 million, double the price of an equivalent apartment in Petah Tikva or Rishon LeZion. The average price of a five-room apartment rose 2.3% in August to again cross the psychological level of NIS 3 million.
However, the general downward trend continues for both small and large apartments, indicating that consumer sentiment has changed. The supply of apartments on classified ad websites also continues to climb, indicating that a growing number of apartment owners are putting properties up for sale now, even if they are not yet ready to sell at any price.
In August, prices for all categories of apartments rose in only two areas: Ramat Gan-Givatayim, which retained the substantial difference compared with Tel Aviv; and in Jerusalem, where the tourist season was at its height, and some sellers may be dreaming of a rich American falling in love with their apartment and buy it at any price.
Factors dissuading homeowners and investors from selling their apartments included rising rents and talk of interest rate cuts, which will lower mortgage costs. Average rents in Tel Aviv rose 1.9% for a three-room apartment and 2.3% for a four-room apartment, but remained unchanged for a five-room apartment, despite protests by many tenants.
The rise in rents generally also raised the gross yield on rental apartments to 3-4% in most of the country, while the Israeli and foreign capital markets do not offer a particularly tempting alternative for investment of savings.
Methodology
In contrast to other online classified ad sites, Homeless charges for all ads it airs, which makes sellers quite prices in accordance with their real expectations and avoids freeloaders. The index gives two figures: the asking price of the apartment, and the average rental yield in each area.
The listed rent is the gross rent. For a month without a tenant, maintenance expenses, taxes (assuming that the rent is more than NIS 4,500 a month), and other costs deduct about 10% on average.
The index displays the yield per apartment - the price of the apartment divided by the rent. Even if there are distortions in listed prices for sale or rent, they should offset each other if they are both in the numerator and the denominator.
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