Over the past few months, numerous articles have been written analyzing recent Jerusalem real estate sales data. Curiously, there has been a lack of agreement regarding how to interpret the statistics.
A recent report on real estate sales activity in the third quarter of 2017 (3Q17) produced many interesting findings. This study focused on sales of three-bedroom apartments, as they represent most of the housing units in the country.
Comparing the third quarter to the previous quarter, Jerusalem home prices rose by 3 percent. However, 3Q17 Jerusalem sale prices were 5 percent lower than in 3Q16.
And to confuse matters just a bit, Jerusalem sales activity in 3Q17 slowed down by 15 percent compared to 2Q17, and by a whopping 45 percent compared to 3Q16.
The dramatic decline in transactions would lead one to believe that the real estate market is not functioning normally, and that this slowdown may reflect a slight market downturn. However, the fact that Jerusalem sales prices have remained strong despite the significant downturn in sales volume—two seemingly incongruous results—cries out for greater analysis. Accordingly, we decided to dig down into the numbers to understand why sales volume in 3Q17 was an astounding 45 percent lower than in 3Q16.
Sales quarters are based on the Gregorian calendar, and the third quarter comprises July, August and September. The Jerusalem sales market basically shuts down for almost a month during the fall holiday season, starting a few days before Rosh Hashanah and concluding after Sukkot. In 2016, Rosh Hashanah fell out on October 2, so the holiday market slowdown affected the fourth quarter sales data. This year, however, Rosh Hashanah fell out on September 20, so the market slowdown affected two weeks in September, or one sixth of the third quarter.
That explains almost 20 percent of the 45 percent slowdown. But what about the other 25 percent? How do we make sense of the disparity of sales between 3Q16 and 3Q17?
Unfortunately, there has been significantly less quality housing stock for sale in 2017 compared to previous years. In addition, fewer new projects hit the market this year, compared to the past few years. Due to this shortage of existing properties and new projects for sale, no one in the Jerusalem real estate industry was surprised to see the data verifying our collective hunch that sales volume has slowed down considerably.
Because of the dearth of good housing units for sale, we are witnessing fairly priced quality apartments selling at a brisk pace. This correlates with our success in marketing Ramat Baka, in which about 40 percent of the apartments in this project that is under construction were sold before the shovel ever hit the ground. Similarly, we are just now starting a quiet pre-sales program for a new luxury project situated in arguably Jerusalem’s best location, and our initial efforts have garnered very strong interest. Lastly, well-priced existing apartments for sale have been gobbled up quickly, which corresponds with the advice that we are currently giving clients: If you find a property that meets your needs and is priced fairly, go for it. As demand outstrips housing supply, good deals are not hanging around for long.
One last thought about the recent data: The fact that prices have not escalated, despite the scarcity of product, indicates that the decade-long market trend of Jerusalem prices spiraling ever higher has waned, and we are happy to see this. We view the current market status, where buyers are more patient and discerning, as a welcome change that bodes well for the industry’s long-term health and stability.
By Gedaliah Borvick