The realtor sector in Israel is in deep crisis as the number of real estate deals being completed has plunged by 40%. The crisis is reflected in the low rate of those taking the real estate brokerage exams in 2022, so that they can obtain a license. The Israel Association of Realtors reports that a large number of real estate agents are abandoning the profession due to the small number of deals, which makes it tough to earn a living in the current situation. Moreover, Ministry of Justice data show that many agents who have passed the exam are not paying their license fee because they see no point in working in this field at the moment.
“Only those who have to sell or buy are in the market today”
2022 was a most unusual year because it was a year of two halves. The first half saw a small decline in the number of deals compared with 2021, which saw a record number of deals, with a monthly average of 12,500 homes purchased every month.
In the first half of 2022, about 11,000 deals were signed per month on average, which was still a very high level. However, in the second half of 2022, the market began falling rapidly. In the third quarter of 2022 there was an average of 8,500 deals per month, and from October 2022 to January 2023 the Ministry of Finance chief economist reported a monthly average of 7,000 deals, down nearly 40% from a year before. Real estate agents told “Globes” that the small number of deals has persisted in February and March and is resembling the real estate recession in Israel 20 years ago.
Anglo-Saxon real estate agency network CEO Ron Novotny says, “Following the rise in interest rates and the cost of mortgages the housing market has been in a slowdown.” He stresses that despite the slowdown, “I do not identify a fall in prices.”
Israel Realtors Association chairman Itzik Levy adds, “Real estate agents that I talk to say that the situation is by no means simple. There are no more young couples, because they cannot afford the interest rates. There are no investors buying apartments because the financing and interest rates are higher than before. There are also no people upsizing, because if they planned to sell their three-room apartment for NIS 1.8 million, and buy a four-room apartment for NIS 2.5 million and take a total loan of NIS 1 million – today it is impossible. The only buyers left in the market are downsizers, who moving from larger apartments to smaller apartments. The problem is that this market segment is very small, and therefore there is a drastic drop in sales. Those in today’s market are only those who must sell or buy.”
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Shahaf real estate network CEO Eran Nissim, who mainly works in the Sharon region, echoes this sentiment. . “We have an 80% decline in the number of deals since the peak, and I say candidly that an agent needing to raise and support a family from this profession will not be able to do this today, unless they are experienced and have already previously been through such difficult crises. After Covid, real estate kicked in and brought in money, but six months ago we reached a new phase, and the situation was swiftly transformed. Apartment sellers should understand that if they do not compromise on their price, there will be no deal. Even if the deal goes ahead it could collapse at almost any stage in negotiations with the lawyers, with the mortgage bank, and in between. Today’s agent must accompany the deal from start to finish, because otherwise there is a big chance that it won’t close.”
When the market is booming, there are more new agents
Levy and Nissim’s remarks are also reflected in the figures. Real estate agents are supervised by the Ministry of Justice regulation of professionals division headed by Amir Haran. Currently, there are some 26,000 agents registered with a valid brokerage license, although the number is misleading. Levy says that in practice the number is much smaller. “In my estimation, about half of the license holders are not in practice currently working as agents. They are appraisers, lawyers, mortgage advisors and the like. Beyond that, out of 10 who start working as a broker, only two survive the first year.”
From the Ministry of Justice official figures, it can be seen that there is a close connection between the number of agents and the state of the market. When the market is booming, the number of real estate agents increases, with a lag of a year, since it takes time for people to register for training courses and the realtor’s exams. When the market falls, agents abandon the profession by not paying annual licensing fees.
In 2015, the previous record in annual deals was recorded, and in 2016, 2,200 brokers joined the market (an increase of 12%). At the end of 2020, the large price increases began, peaking in 2021-2022, and this was reflected in an increase of 5,000 agents (about 26%) by the end of 2022. This large increase was a response to record number of deals carried out in 2021, with 150,000 deals completed, and the real estate brokers industry prospering as it had never prospered before.
Over the past decade, there have been two periods in which the number of active agents fell. The first wa in 2014, when there was a fall in deals as the market waited for the implementation of then Minister of Finance Yair Lapid’s 0% VAT plan. This led to fall of about 500 people agents who held a valid license. During the Covid closures in 2020, when the market was paralyzed, 1,000 agents decided to leave the profession.
Drawing the conclusion that it is currently a waste of money
The crisis that began in the second half of 2022 has not yet been reflected in the official figures because real estate agents have until the end of March to pay their annual licensing fee, so it is not yet clear how many will choose to do so.
But Levy says that among the agents, the latest developments are being felt. He says, “We feel the slowdown in a number of ways, one of which is the amount of renewals of agents licenses made in recent months. If in the past we reached about 25,000 real estate agent license holders, today we are talking about a fall of at least 20%, due to the market being so difficult. There are agents leaving the profession, but in good times it doesn’t reach these levels. These numbers remind me of the Covid period.”
A hint of what is to come can be found in the agents exam figures. In 2022, about 9,000 took the exams, with about 6,200 passing, and only 3,883 of them paying the licensing fee. The others probably came to the conclusion that these days it’s a waste of money. This is an unusual occurrence, and the lowest percentage ever of new brokers (about 43%) out of all those who took the tests. Even at the peak of the Corona virus, the percentage was higher and reached 52%.
Published by Globes, Israel business news – en.globes.co.il – on March 30, 2023.
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