Homebuyers’ confidence in Israeli construction companies returns

Posted on 27. Jul, 2010 by Buy-It In Israel Staff in Buying On Paper, Israel Real Estate

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More Israel real estate buyers are again purchasing apartments and houses from contractors following the changes in the Israeli Sales Law, which seeks to protect the interests of new apartment buyers. In 2009 and over the course of the first five months of 2010, there is a rising trend in the rate of new apartments bought from contractors compared with 2008, according to a survey by the Contractors’ Association.

Last year every fourth apartment was purchased from a contractor. In 2009, 102,149 apartments were sold representing an increase of 8.5 percent over the previous year, out of which 24,114 or 24 percent were sales of new apartments through a contractor and the remainder sales of second-hand homes. A year earlier, in 2008, the relation between new homes and second-hand home purchases was 20 percent to 80 percent respectively. The trend also continued in the first five months of this year during which more than 42,000 real estate deals were registered out of which 9,692 were sales of new apartments, representing a share of 23 percent.

The Contractors’ Association attributed the trend to changes in the Israeli Sales Law. The changes were enacted following the collapse of the Heftsiba housing project a few years ago to better protect and secure buyers’ money paid to contractor companies at the preconstruction stage and until the end of construction. “The protection of homebuyers’ money has boosted the confidence in the purchase of apartments from contractors,” said Yossi Gordon, head of the Contractors’ Association.

The collapse of the Heftsiba construction company in 2007, which left many families without their money and in many cases, without the new apartment they had paid for, has prompted the Bank of Israel to step in and announce a number of decisions regarding the payment of construction companies at pre-construction stage. The Sales Law now stipulates that as long as homebuyers pay their money directly into a special account set up for the project and all payments to a construction company are made through pay slips directly into the special account, thereby preventing money being deposited in a different account by mistake, their money is protected. In addition, the construction company or contractor must provide homebuyers with a bank guarantee from the bank accompanying the project on every payment made. Furthermore, the changes to the Israel real estate Sales Law require that every contract for the sale of a new apartment under construction bought from a construction company or contractor have specifications attached to it. The specifications include details such as materials used in the apartment, the number and location of electrical sockets and what types of tiles, sinks, etc. will be installed.

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