Profit of over one million shekels on a 'Mehir LeMishtaken' apartment in Lod

The deal: On Moshe Rabenu Street 1 in the Ganei Ayalon neighborhood in Lod, a 5-room apartment with an area of 131 sq. m was sold for 2.2 million shekels.

The neighborhood: Ganei Ayalon is better known as the "Ahisamach Complex," as it is a neighborhood built on lands that previously belonged to the nearby moshav. It spans 737 dunams located east of Route 40, west of Nahal Gezer, and south of the Ganei Yaar neighborhood.

In 2006, the complex was planned through a single plan, but in 2015, a corrective plan was approved to "adapt the planning to the special needs of the ultra-Orthodox population expected to occupy the planned neighborhood," according to the explanatory notes. The changes included increasing the number of housing units from 3,000 to 3,600 and converting areas intended for residential buildings into public buildings.

Ganei Ayalon participated in several tenders and lotteries under the "Mehir LeMishtaken" (Price for a Resident) program. The deal we are presenting this week was carried out in a project that participated in a very early stage of the program: the Israel Land Authority tender for the lands was carried out in the second half of 2015, the lotteries were held in April 2016, and the occupancy permit for the project was issued at the end of 2018, two and a half years after the lottery.

Today, such projects are rarely seen. Projects participating in the "Apartment at a Discount" program are often not planning-ready, development works take years, and the gap between the lottery date and the occupancy date can reach at least six years.

Prices: An examination of the average prices of 5-room apartments built in Lod in the last decade shows that prices today reach an average of 20.5 thousand shekels per sq. m, a decrease compared to 21.2 thousand shekels per sq. m last year, indicating a price decrease of a few percent. In Ganei Ayalon, such apartments reach an average price of only about 17 thousand shekels per sq. m. The gaps can be explained by the neighborhood's population and the abundance of apartments purchased under "Mehir LeMishtaken," which were of relatively lower quality compared to apartments sold on the free market.

In our estimation, Lod is currently in a state of a large glut of apartments. According to the Central Bureau of Statistics, there are currently about 3,100 unsold new apartments in Lod. Within the neighborhood, apartment prices are maintaining stability in the last two years, likely due to the ultra-Orthodox character of the neighborhood, which attracts demand regardless of the general market situation.

The project: This is a project by Zohar and Tzafrir Sharbat built in the southern part of the neighborhood. About two months ago, the Chief Economist at the Ministry of Finance wrote a review on this project, revealing that 340 apartments sold during 2016 at an average price of about 850 thousand shekels are currently selling for around 2 million shekels.

To be precise: 3-room apartments were purchased under "Mehir LeMishtaken" for an average of 660 thousand shekels and were recently sold for 1.67 million shekels; 4-room apartments purchased for 808 thousand shekels are currently selling for 2 million shekels; while 5-room apartments purchased under the program for an average of 910 thousand shekels are currently selling for an average of 2.2 million shekels. The Chief Economist found that almost half of the lottery winners in the project sold their apartments during the last three years in which they were allowed to sell. His calculations show that the average real capital gain reaped by the buyers reached about one million shekels.

Analysis: The capital gain increases as the apartment area increases. According to our calculation, the real profit from this apartment reaches approximately 1.1 million shekels, which is similar to the average neighborhood price.

The broker's word: "What distinguishes Ganei Ayalon from other areas in Lod is that the neighborhood is not large, but it concentrates demand from the ultra-Orthodox and religious public from Jerusalem, Elad, and Modiin Illit, so the phenomenon of a large supply of apartments does not exist here, and the prices are accordingly," says broker Gal Ben David from the Mishkan HaNadlan agency. Regarding this deal, he adds that "this is the average price of the apartment, and what works in its favor is the fact that it faces an open space in the park."