Demand Will Come Back in a Big Way!
By Jacki Wiluzanski · · Updated · 2 min read
"A real price drop comes from supply exceeding demand. That is healthy. But prices today are falling only because of the difficulty of closing deals: the interest rate. So there are no deals, but there is demand waiting to come out. When the interest rate goes down, everything will change." Real estate appraiser Saar Peled warns about the current state of the market. And he also has a solution.
Is there a solution?
"I say that the simplest process is the most correct one: build a sufficient quantity to meet demand, and prices fall and rental prices cool as well. But they did not manage to build the right quantity. The very low interest rate in the past created higher demand from those who were thinking of buying an apartment, and created enormous pressure of hysterical demand beyond the norm. In the end, prices rose.
As soon as a person has the chance to buy, they will buy
Where will we be when the interest rate is, say, not at the negative peak but in the middle: 3%?
"I think demand will come back in a big way. It will not return to 2021, when there was a real frenzy of deals, one chasing the other. But the market cannot stay frozen. For the end consumer it is bad, it is bad for contractors who cannot produce, and bad for the state, because it has no income from real estate taxes. It has no property tax and no purchase tax revenue. Today there are no property taxes because there are no transactions. This creates a situation in which the state loses future revenue. It has to get the market working; it cannot be allowed to stay frozen.
How do you define a "reasonable" interest rate?
"Let's say we are at a very high level, and when it comes down, things will change. It is not that there has never been an interest rate like this, but the rise this time was very fast. It did not take a decade, but it was quick. Even the first drop in interest rates will not make the process fast. If it drops by a quarter of a percent, it will still be high, and even so, most of the population with high leverage ratios will be in trouble.
Everyone is waiting for the interest rate to come down
