The company that paid nearly 200 million shekels for land in Ness Ziona
A single Israel Land Authority tender for land to build apartments in Ness Ziona has concluded, with a bid that reflects a discount of about 18% on the land. Who are the winning companies, how much does the land cost, and why housing prices cannot really drop in this area.
The last few months have not been particularly successful for the Israel Land Authority. As we noted this morning, only one tender for multi-family construction closed yesterday out of a long list of seven tenders. Of these, 4 are Amidar tenders, one is for industry, another for mining and quarrying, and only one tender will market land for multi-family construction — for the building of 258 apartments in Ness Ziona.
Since August 5, only two Amidar tenders have been held. While the state waits for tens of thousands of units to be released to the market, the delay and foot-dragging in tenders could lead to a rise in housing prices in the future. Out of the 3 latest tenders issued on August 5, the tender in Nof HaGalil for the construction of 560 housing units failed. Poor marketing is a sure recipe for price increases.
So what happened in Ness Ziona? A total of 258 housing units will be built there. This is land located in the southern part of the city, between HaTe'ena and Eden streets, and not far from Weizmann Road — north of the old Kfar Aharon neighborhood. The tender details show that the company that will build in the complex is Euro - Shai Hai Ltd. This is a joint company established last year, jointly owned by the Shai Hai Entrepreneurship and Investments Group and the Euro Group, for the purpose of executing joint projects and submitting bids for Israel Land Authority tenders.
According to the appraisal, the value of the land is 209 million shekels. Because of the low minimum price, about 28 million shekels, no fewer than 21 companies submitted bids for the tender — meaning the demand was very high. That is how it goes when it comes to land in a town that is not peripheral and the minimum price is low. The company offered a price of 170 million shekels and will pay development expenses of about 22 million shekels — meaning 192 million shekels in total (excluding VAT on the land component) — nearly 750 thousand shekels for land per housing unit.
The area on which the project will be built is about 10 dunams. The next two bids were 158 million shekels, so the gap between the tenders was not negligible. Compared to the appraisal price, this is a discount of more than 18% — but in such amounts, and in this period, it is rare to find companies that will submit a bid equal to the appraisal price of the land.
One can see many Israel Land Authority tenders in the periphery, where land prices per housing unit reach 250-350 thousand shekels. The price of land in cities closer to the center is usually 3-4 times higher, and this is the reason why housing prices in the center are higher than in the periphery.
This is further evidence that housing prices can only drop by a few percent, up to a certain limit. The construction components and the percentage of entrepreneurial profit, even if they are at their lower limit, can only reduce housing prices by a few hundred thousand shekels. Beyond that, there will be no economic feasibility for the project and the bank will not allow the entrepreneur to take a loan.
Housing prices in Ness Ziona usually range between 32-36 thousand shekels per square meter. The high end is for new projects and sometimes the threshold is crossed when it comes to small apartments.
