What a year we have had in the housing market, a year in which we were prepared for parting ways with programs like Mehir L'Mishtakon and TAMA 38, but at the last minute, it seems, both of them were allowed to stay with us for months to come. This is the year in which we said goodbye to Sde Dov, to the dismay of some and the joy of others, and this is the year in which we were already promised that zero interest rates would rise and apartment prices would fall, and again, like last year, nothing happened!
So what can we expect next year? Here's the forecast:
Apartment prices are about to rise.
In recent years, various programs have made headlines that were intended to increase the pace of construction of new housing units and reduce the gap between demand and supply, and as a result, lower housing prices, but so far, it appears that these programs have failed to achieve their goal.
Although the 'Price for the Tenant' program was granted a few more months of grace and extended until the end of 2020 to allow the new government to formulate its policy on the issue, it too will not be able to provide a solution to the shortage of land and housing units. The hope of raising the zero interest rate, which would lead to a decrease in apartment prices, has been replaced by the understanding that Israel, like the US and Europe, will remain in a world of low interest rates, so according to all predictions in 2020 we are going to pay more for an apartment.
The future of urban renewal
And what will happen to urban renewal? In recent weeks, the National Planning and Building Council decided that the TAMA 38 plan for strengthening buildings against earthquakes will not be renewed for another 5 years, but will end in October 2022, when from this date plans to strengthen buildings will no longer be approved within the framework of national outline plans, but only in city building plans (TABA).
In the meantime, projects will be able to continue as usual and building permit applications will be submitted until the end of the program, but it is likely that we will see some slowdown due to developers' fear of starting processes that may take a long time and not meet the schedule. It is important to emphasize, of course, that the decision does not concern 'evacuation-construction' projects, which will continue as usual.
What will happen to the office towers?
In 2019, almost 200,000 square meters of office space were added to the commercial real estate market, and currently another 700,000 square meters are being built in the Dan Bloc alone. At the moment, it does not appear that there will be any change in the pace of construction of office towers, however, demand is increasing accordingly. As of today, office occupancy in Tel Aviv stands at 94%, and if you move further away, the occupancy is at least 85%.
The demand from startup companies for offices in Tel Aviv is leading to a continuous increase in rents in the city, but actually a decrease in nearby cities such as Herzliya. Anyone looking to invest in commercial real estate and purchase an office should pay attention to future nearby projects that may affect demand. However, the return on commercial real estate is one of the highest in the real estate market and is still considered by forecasters to be a definitely worthwhile investment.
Meet the autonomous crane
There is one area that is definitely going to refresh the real estate market in 2020, and that is technological advancements in the construction industry, which will change the face of real estate in the coming year. The digitization of data will affect the way we conduct real estate transactions or close mortgages, and it will certainly save bureaucracy and time, but construction processes are also going to undergo a refreshing renewal.
One of the interesting projects that will be launched this year is the autonomous crane based on machine learning technologies, which saves manpower, prevents human errors and is able to operate non-stop 24 hours a day, thereby accelerating construction processes. The autonomous cranes will join a series of technological innovations that have already entered construction sites, such as drones that help project managers monitor construction progress, 3D printing and innovative methods for green and energy-efficient construction.
This is undoubtedly going to be an interesting year in the real estate industry and even a year of opportunities. If investors and homebuyers are able to read the forecasts, monitor the price increases, and examine the market with a close eye, they will also be able to achieve a very nice return in 2020.
