Building Confidence, Staying Safe: Real Estate and the Coronavirus

By Shia Getter

Investors around the world are panicking in the fallout of Covid-19. There's a good reason for that. Their portfolios are dwindling and even disappearing as the market tanks under the incredible distress currently rocking the world's strongest economies.

But what about real estate? Is that different? And what about real estate in Eretz Yisrael?

Mind the V's … Not the Virus

Volatility. Stocks are notable for their ups – and notorious for their downs. As soon as there's reason to panic, investors do – and they sell. Real estate, however, is far less volatile. This stable investment isn't prone to strong fluctuation. Especially in a market like Eretz Yisrael's, real estate represents a historically secure venture.

View. Stock investors tend to view the market with a short-term perspective. Real estate, on the other hand, is viewed in the long-run. Even if the market seems cool now, real estate investors know that with time (and patience), they'll see property values rise. This is especially true in Eretz Yisrael, where the market runs on high (and ever-increasing) demand – and isn't based at all on speculation and investment. Even when the rest of the world comes to a standstill, our communities continue growing, baruch Hashem, kein yirbu! We're still making weddings and brissim – and we still need housing for our growing families.

Vantage. Investing borrowed money would be irresponsible and even dangerous on the stock market. But doing so with real estate is considered safe and relatively low-risk. And even in this time of great economic instability, mortgage lenders in many countries – including Eretz Yisrael – are striving to be flexible and understanding in working with their customers. They're trying to provide reasonable rates and decent loans within a comfortable framework.

Value. The stock market may take a long time to recover from the devastating blows of the coronavirus, while the real estate market in Eretz Yisrael will bounce back quicker. That's because buyers will return, and they'll very likely do it at all once, based on past experiences. Not only that, the supply of apartments is likely to be affected by the virus (due to worker and material shortages and so on). If new apartments aren't produced on target, there will be a shortfall (due to ever-increasing need) and prices will rise. And when Moshiach comes, bimheira biyameinu, we'll need more diras than ever. Property in Eretz Yisrael always retains – and increases – its value.

Look at Your Leverage

Buyers in Israel will actually find themselves in an advantageous position in these times of economic uncertainty. That's because a slow market gives buyers leverage: extra negotiating power with developers regarding their terms of contract. In general, this can translate to a better price, an improved payment schedule and additional securities, which the developers would not have otherwise granted under normal circumstances.

Unfortunately, this small country has seen more than its share of catastrophes – from all-out wars to conflicts of many sizes, a constant threat of terrorism, boycotts, and more. As Paz Economy and Engineering CEO and controlling shareholder Daniela Paz Erez told Globes, "The thought that this is something that will be with us for several months finds Israel in a better position than other countries, because we know how to get through such pitfalls. As I see it, the coronavirus cannot cause a difficult situation in the real estate sector. […] I believe that we will be able to adjust in this situation, too."

That ability to adapt is linked to Israel's real estate sector being a solid, demand-based market. Approximately 90% of homeowners in Israel own just one apartment, while under 3% possess more than two. Thus, the vast majority of people own homes for themselves. Israel is a continuous consumer of housing – and the government is always working to find solutions to meet this ever-growing demand. Even foreign buyers aren't purchasing for investment. Either they or their children eventually plan to live in those diras, be'ezras Hashem.

Israel does not generally grant mortgages of over 50% to foreigner buyers, while Israelis usually take mortgages that max out at 70-75%. Since it's not a market based on heavy debt, it's not a high-risk market. Buyers and homeowners won't be cashing out so quickly—or at all.

We obviously have no idea what the housing market will look like in seven, 15, or even 35 weeks from now. But we do know that big decisions should always be made with a long-term perspective. Hopefully soon, with the coming of Moshiach, bimheira biyameinu, we will all be returning to Eretz Yisrael. When you're ready, we're here for you.

For guidance, protection and to get best value for your money contact The Getter Group 718-473-3950 or email [email protected].

This article is not a substitute for professional or legal advice. The author does not guarantee that the information contained herein is accurate, and does not assume any liability for any loss or damage caused by errors or inaccuracies in this article.