Neve-Shamir is not built yet, but many of us are already familiar with the area and the different builders.
Currently, 2400 apartments are being built in Neve-Shamir, but it is planned to reach a destination of 6000 apartments. Now, another 611 apartments are on their way. How is this going to affect prices in the neighborhood?
You may think that now that there is more supply, prices should go down. Analyzing the auction results will allow us to see if this is true. To do so, we need to explain how the builders buy the land from the state of Israel.
ILA Auctions
Once the regional building committee designates land for building purposes, the Israel land authority (ILA) auctions the land. Builders are invited to give in their bids. The builders that offer the highest price for the land win the auction and get the option to buy the land.
Such an auction was held a few weeks ago for several lots of land in Neve-Shamir. The remainder of the lots in Neve-Shamir, are going to be reserved for building buildings and not private homes, like the current constructions in Neve-Shamir. Unlike the previous auctions, this auction did not include any 'Mechir Lamishtaken' apartments, and all the apartments will be marketed in the open market. The results of the auction were published this week and can give us good insight into the future of the neighborhood.
Firstly, there were many bids given, between 20 to 30 bids on each lot, showing great interest by builders in the area. A similar auction took place in Tzfat on the same date. Only five bids were given. In Arad, only one bid was given.
Secondly, the amounts offered were extremely high:
4 builders won the different lots. The biggest 'winner' is an unknown company that is registered as Neve Shamir Shikun Veyazamut (Neve Shamir Housing and Building). Apparently, this company has built before in Efrat. They are going to build 326 units, in very desirable locations, with a facing view. How much did they pay for this land - 250,000,000 NIS. This works out to 765,000 NIS per apartment. (Just for the land, not including any construction).
Another company that is going to be building many apartments, is Terison, which is part of the Wolfson building company. They are going to be building 167 units. For this Wolfson paid a total of 163,000,000 NIS, which translates to nearly 1,000,000 NIS per apartment. These are very high prices.
What these prices mean
You will probably ask yourself how I know these prices are considered high. First of all, I have spoken to three people which were involved in the auction. All three used the same word to describe the winning bids as 'Metoraf' - which can mean crazy or insane.
But here is another way to understand what these prices mean. Real estate is all about comparables. It is hard to compare these auctions to the previous ones since they included Mechir Lamishtaken. I, therefore decided to compare them to a similar auction in a different city nearby - Modiin.
In an auction that took place in Modiin at the end of last year, the price paid per unit was 1,000,000 NIS and this was considered high for the city. A 4 room apartment in Modiin will cost you over 2,000,000 NIS. If builders have paid the same amount in RBS, they will not sell the apartments for less.
When will we see the effect?
It is still going to take time until these apartments will be marketed. After winning the auction, the builder still has to write the architectural plans and get them approved (Heter Bniya). This process can take a year or more, depending on the builder and the municipality.
Even though these apartments are still a while away from completion, they might have a closer effect on prices in Neve-Shamir. After the current builders see what other builders are willing to pay, it might cause them to raise prices immediately.
What is clear from the results of the auction, is that prices in Neve-Shamir are increasing rapidly.
If you would like to learn more about apartment in Neve-Shamir visit our Project page.
Aliza, I follow your logic that this is where prices seem to be headed. But what a builder charges does not always translate into what buyers are willing to pay. These projects may not get the prices they need to cover the crazy amounts they spent just for the land. Maybe a motivated home buyer who wants to live in RBS, but not an investor.
But builders sometimes lose money on projects they paid too much for. The last thing a home buyer wants is to buy in a project that is losing money. Even in ideal situations people worry about poor quality workmanship. When a project is losing money, the builder will certainly cut corners to save money. Bu…
I guess this is great for property owners. But what about the next generation? how will they buy anything on 8,000 shekel a month salaries? 2 room apartments will cost 10,000,000 shekels in a few years at this rate