Ex-San Franciscan advises new Israelis on buying real estate

HAIFA — In 1890, when Sol Solmonson was a real estate agent in San Francisco, little could he ever have imagined that a great-grandson of his would one day be following the same occupation in Israel's Haifa.

He was no doubt proud that his own son, Julian Solmonson, was a licensed real estate broker in San Francisco from the early 1920s until about 1950. But he never could have suspected that a family scion, Jim Bennett, would become successfully engaged in the same field far away and two generations later.

This information emerged quite by chance during an interview with Bennett to get the lowdown on current trends in Israel real estate. The lead question was, "Why are homes so expensive in Israel?" The information was forthcoming.

Last year, the real estate market in Israel reached the peak of a boom in which prices more than doubled. Today, buyers are in a position almost to dictate prices. By next year a shortage of homes will again be evident and prices will zoom once again. Following that, expect prices to drop.

These are the views expressed by Bennett, a former San Franciscan and prominent Haifa real estate broker, and his sentiments are echoed by all informed observers.

The massive Russian immigration of the past decade fueled an enormous chain-reaction demand for homes. With the help of government grants and mortgages, and their own slowly accumulating savings, the new immigrants were able to purchase old and in many cases rundown flats cheaply. The former occupants were thus enabled to improve their status and move into more desirable neighborhoods, with a consequent upward shift from there. With minimum unemployment, the population move continued, and the constant demand affected prices.

Building contractors recognized the opportunities, borrowed money and began construction on tens of thousands of homes and apartment houses that can be seen today sprouting all over the country. However, potential supply soon exceeded demand, with inevitable results.

Furthermore, fearful of inflation, the Bank of Israel kept interest rates high and contractors ran out of operating capital.

That is the current situation. With relatively few new building starts in recent months, builders seek to unload the surplus on their hands. Thousands of apartments are on the market, awaiting buyers.

Modi'in, for example, a new community located halfway between Jerusalem and Tel Aviv, is due to become a major metropolis. But at the moment there is little movement there and new homes stand empty.

Bennett, who is fluent in English and Hebrew, has words of advice for potential buyers: Shop around, and don't hesitate to bargain. As much as 10 or 15 percent may be knocked off asking prices in the present market, he says.

Values are also based on location; the most expensive flats are located in Jerusalem and North Tel Aviv, with Herzliya and Netanya close behind.

However all that is due to change in the next year or so. As the surplus on hand is disposed of, as immigration continues and population rises, demand will again propel prices upward. Such demand comes not only from Israelis seeking homes, but from Jews abroad as well, many of whom seek to acquire a flat in Israel, either for sentimental reasons or as an investment.

As for rental apartments, the rent that people are willing to pay is so low that it would return barely 3 percent on an investment. Banks pay more on savings accounts. And so, no one builds for rental.

Bennett, who has family in the Bay Area, including sister Nancy in Petaluma, moved to Israel in 1967 with his wife, in the aftermath of the Six-Day War. They went first to a kibbutz, but decided that was not the life for them. He was employed in the public relations department of the Technion, was a shaliach (emissary) overseas, and during a stint in the aliyah office in New York, where he advised new immigrants on problems and opportunities in housing, he decided to enter that field professionally.

A good real estate agent in Israel not only serves as the broker to bring buyer and seller together, but is also the source of information and advice on technical, legal and financial aspects.

So why are homes so expensive in Israel? For one thing, the government controls most of the land. If more land were released for construction, it could bring prices down. But basically this is the economic law of supply and demand. So long as there is demand, prices will remain high.

His most difficult clients are university people, scientists, the highly educated. They study all options, take measurements, defer decisions and by then the flat they want is sold.

The best buyers are what he calls the common man, perhaps the owner of a small store or a vegetable stand, who has saved up his money. He will not seek to do a doctorate on the subject. He will look at one or two homes, then take decisive action.