Why Purchasing Groups are Historically Successful
Historically, the overall picture shows that Purchasing Groups are actually a success story and not the other way around, God forbid.
Most Purchase Groups over the years have led their participants to properties at significantly lower prices than similar properties in the same area, sometimes with even higher specifications and more invested planning than more conventional developers are offering. Since group participants have a significant stake (and the ability to wield that power) as to the form of planning and building standard specifications in their group, they have real influence at setting the budget for the finished project.
As such, we have seen that the attempt to transfer the entire real estate market to the developers not only did not solve the problem of real estate prices, it exacerbated it.
Why the current land shortage solution (called ‘residential price’) is not suitable for the majority of buyers
Referring all official tenders to the “Residential Price” (Mechir L’Mishtaken) programs is a bad idea, since it only caters to those for whom this is their only property. The Mechir L’Mishtaken program is an Israeli invention, whereby plots of land are put up for bids, but not in open auction form. The only eligible bidders are registered contractors. This puts final pricing solely in the hands of a small circle of people, entirely locking private individuals out of the game.
Therefore, it isn’t the solution for everyone looking to purchase. In any case, Residential Price programs could never provide a solution for Israel’s entire population. Rather, it has in fact only assisted a very small part of the population. The program can only be accessed through obscure lotteries resulting in a small number of households winning huge price discounts and becoming millionaires. All this comes at the expense of the state while all other types of buyers remain left with no solution. These populations include those needing to upgrade to larger units, those who once owned an apartment, investors, and those masses who simply didn’t win the lottery. This solution, therefore, failed for most buyers.
Even for lottery winners, there are quite a few who have been waiting over five years for their developer to issue permits or finish construction, despite the illusion and promise that it is “safer” building with a developer rather than a group.
Another minus with Residential Price projects is the lack of control buyers have as to design or budget of the units, including technical specifications.
The role of interest rates, politicians and real estate developers, who all have their own interests at heart
Today, one key factor contributing to the increase in the Bank of Israel’s interest rate is direct pressure on entrepreneurs who won land through various tenders, but have put the public on hold by only very slowly releasing apartments into the market, in order to keep real estate prices high. Unfortunately, politicians are simply not doing what they can do to force developers to either return land, or to release apartments to the market on a quicker timeline, in order to lower housing prices.
Why the power rests with individuals in a Purchasing Group
Thanks to all of these factors, we recommended that purchasers take their fate into their own hands, be they housing developers, investors, and (especially!) for those wishing to purchase a first apartment, is to join a Purchasing Group on private land.
True, there are many elements of uncertainty, and in the past, there have unfortunately been disappearing contractors, but safeguards have been put into place to protect individuals within the group. Purchasing Groups simply can’t be beat, not in terms of confirmation of delivery time, not in terms of final price, and certainly not in terms of control over what is being built.
If you don’t want to wait for salvation to come from the previous, current or next government, or from some benevolent entrepreneur, join one of our Redemption Investments groups.
