April 13, 2024
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New Construction vs Existing Apartments

By Ben Levene

Clients often ask whether they should invest in a newly constructed property or an existing apartment. Unfortunately, there is no one-size-fits-all answer to this question. It is crucial to discuss your specific needs with me and understand what best aligns with your requirements. If you can keep both options open, it provides you with more choices in a market with limited supply, increasing your chances of finding the perfect fit. When considering buying in new construction, there are several factors to take into account.

Timing

If you have a specific date for relocating or if your children need accommodation by a certain date, and you prefer not to rent or arrange temporary housing, it’s essential to conduct thorough due diligence. While there are measures in place to address delays in apartment delivery, it doesn’t guarantee completion by your desired time.

100% Guarantee

Some individuals prefer having all the details before making a decision. Although we can provide answers to most of your questions, there may be some more challenging inquiries. For instance, determining the view and lighting from each window can be difficult.

Benefits of Buying an Existing Apartment

With an already-established apartment, you have the advantage of physically entering the space and getting a sense of its feeling. Even if it’s not perfect, everything is known, and you have a clear understanding of how the space functions. You can always modify the layout by knocking down walls and making cosmetic changes to suit your preferences.

Brand New Construction

Purchasing a property in a new construction development offers the significant advantage of acquiring a brand-new building. Many people hesitate to invest in older buildings. With refurbished buildings, such as those undergoing TAMA 38 renovations, you can experience the freshness of a new building.

Financial Incentive

Buying in new construction can provide the advantage of acquiring the property at a lower price compared to its market value if it existed today. For example, I have a project in Old Katamon where you can purchase an 1,100 sq ft, 3-bedroom apartment with parking and a sukkah balcony for 4,850,000 NIS. In contrast, purchasing a similar apartment in an existing modern building could cost anywhere between 5,700,000 and 6,500,000 NIS. This is not always the case and requires research with each individual project.

Upgrading

Many clients choose to buy in new construction with the option of waiting till it’s finished and then deciding if it’s good or hopefully, if well invested, can sell what they bought and purchase something new that is more suitable to the client’s needs. This mindset can be beneficial, as you enter the market and hopefully benefit from the property’s value appreciation over time. When the time comes, you can sell and buy what you truly desire or need, often at a better price point.

Payments

One distinction between purchasing a property off-plan (buying on paper) and buying a second-hand property is the difference in payment plans. When buying from a developer, you have the flexibility to make payments over the period of the build, allowing you more time to arrange the necessary funds. It’s important to note that the remaining unpaid amount is tied to an inflationary building index called the madad. This index safeguards the developer against inflation and the rising costs of construction materials.

In the case of second-hand apartments, you establish a lien on the property, and the payment plan follows the agreed-upon schedule. Typically, the payment schedule spans approximately six months, with the final payment being made upon receiving the keys. The advantage of second-hand apartments is that there is no index involved, providing you with clarity on the exact amount you will be spending on the property.

It’s advisable to seek legal advice to fully comprehend the implications of both payment plans and the legal protections offered.

Conclusion

It is ideal to consider both options when deciding between new construction and existing apartments. By consulting with us, we can assist you in determining which choice is the right fit for your specific circumstances.


This article is based on the opinions of CapitIL Real Estate CEO & Co-Founder Ben Levene. Ben Levene is a Jerusalem real estate expert with over 10 years of experience, specializing in helping Anglos purchase real estate in Israel. To start your Israel property search, please contact Ben at +972-53-822-4336 or [email protected]

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