• moshe166

Should I Wait Till House Prices Drop?


I remember 20 years ago when my wife and I decided to buy our home in a new project in Ramat Bet Shemesh, Israel. We’d steadily seen prices rising the previous 5 years. We felt that the house we were buying was over-priced. Nevertheless, we had the funds to put down the deposit, the development was in an area we liked, and the bank was ready to give us a mortgage. We felt that if we didn’t get our feet into the housing market now, we might never be able to. I knew then it was the right decision.

I asked a friend who was also considering buying, whether they were going to go for this project. I was gobsmacked by his response. He was going to wait until the prices went down. His only evidence that would happen, was that they were too high and therefore, must.

While it is true the house price balloons historically always end with a pop and everything crashing, there was no evidence that we were near that point. On the contrary, Israel’s population had massively grown in the 1990s with over a million former Soviet Union Jews moving to Israel in just 10 years. This created surging demand for housing in Israel. In the 2000s, Jews from France, the UK and the US began buying second homes in Israel, adding to the surge demand. Furthermore, Israel’s population was naturally increasing.

I also explained to my friend that even if houses would drop the very next day, they would still grow higher 10 years from now, so unless he wanted a quick re-sell, he had nothing to lose and everything to gain, by buying now.

Another reason he gave was that he wasn’t sure if this was the area he wanted to live in, perhaps he wouldn’t be happy here and he’d want to move.

That is fair, but he still needed to get onto the property ladder now. If it turned that he wanted to move, he could easily sell his place in a a couple of years and have the funds available to buy in his new area. But if he left his money in the bank for a couple of years, his spending power would be reduced, and he’d have to settle for a smaller place wherever he eventually chose.

My friend took my advice and is very grateful that he did.

Today, the answer to this question is a little more complicated. We don’t know what the long-term effect Covid 19 will have on our economy and on house prices. In theory, large scale unemployment should bring prices down, but Aliyah agencies are predicting a huge surge in Covid related immigration to Israel. This will lead to only greater demand for housing.

At the end of the day, I don’t know what will happen to house prices in Israel, just as I don’t know what will happen to the USD/GBP/Shekel exchange rate. All I can say is what I said then. If you can afford to buy now, do it. Don’t wait for what might be. You will be happy in the long term.

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