Israelis Need Double Number Of Salaries To Buy Home

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israel apartmentDeloitte Touche Tohmatsu found that Israelis must work far longer to buy an apartment than Europeans.

Saying that housing in Israel is too expensive is like saying the sun rises in the morning. This axiom is a regrettable fact from which the Israeli consumer has been suffering in recent years.

What is interesting is to check whether, and to what extent, the burden of housing in Israel is unusual, compared with major countries and cities in Europe. Although Israel lies deep within the Middle East, Deloitte Touche Tohmatsu decided that we are interesting enough of a market to be part of their study examining various criteria and characteristics in the real estate market in the 17 leading countries in Europe for 2014.

The real estate market is a capital intensive market, and its development therefore depends above all on financing concerns. The rates of leverage and local interest rate can indicate the risk in the market, since in a more challenging and problematic market, the bank will charge a higher premium (in the case of Europe, the interest rate beyond the Euro LIBOR rate – the equivalent of the Israeli prime rate).

Unsurprisingly, the faltering Russian market is at the top of this list, with the bank demanding a 10% premium from the developer in order to finance a project. The loan to value ratio (the amount of financing divided by the value of the project) in this market is 80%, one of the highest, compared with the European average of 68%.

The Israeli market is in the middle of the table, with an average premium of 2.5%, lower than the European average of 3.3% above the Euro LIBOR. Belgium is at the bottom of the list, with a banking interest spread of less than 2%, hinting that the risk in this market is moderate, which is confirmed by the fact that the working time required for a Belgian to pay for an average new apartment (70 sq.m.) is the shortest – only three gross yearly salaries.

For the second straight year, Italy is at the bottom of the table measuring the number of housing units whose construction has been completed per 1,000 residents. Italy and Hungary are the only two countries in which this ratio is less than 1.

According to this index, Israel enjoys a respectable ratio of 6.1, double the European average, but the index of building starts per 1,000 residents is a more disappointing 4.3. This is still above the European average, but is lower than the Israeli ratio for 2013.

Read more at GLOBES ISRAEL.

{Matzav.com Israel}

2 COMMENTS

  1. HIGH PRICES THAT FOREIGNERS ARE WILLING TO PAY FOR APTS – IS MAJOR REASON WHY
    THEY ARE SO EXPENSIVE AND BEYOND THE REACH OF THE AVERAGE ISRAELI….

  2. Foreigners buy apartments in Yerushalayim… and a bit in Tzfat and Tel Aviv. If families were willing to move out of the mainstream, they can find better prices. Nachliel for example, is a chardal yishuv that is very commutable to Yerushalayim and Tel Aviv. Houses go for about $200,000, ground level on a chatzi dunam. Beitar has great deals to be found as well. And for the more yeshivish, the new neighborhoods in Moshav Matisyahu offer the convenience of Modiin Ilit/Kiryat Sefer in an American style community with fairly affordable housing. For the more dati leumi, there are amazing deals to be found in the north and south – and with the new train lines, these too are affordable.

    Nobody said you have to live in Bet Shemesh, Tel Aviv, Modiin or Yerushalayim. Look a bit outside of the box, and there are very affordable, beautiful communities available.

    It’s a shame that there aren’t great deals to be found in the big cities. But this is life, and the more “out of town” feel of many emerging communities makes it a very affordable and practical alternative.

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