Until recently Ashtrom Residences was called Ashdar but Ashtrom Group’s management decided to brand the subsidiary as part of the parent company. “When I joined the Ashtrom Group (TASE: ASHG) 12 years ago, I asked in the first month why the company was called Ashdar and not Ashtrom Residences,” says Ashtrom Residences CEO Arnon Fridman. “They explained to me then that Ashdar is a much stronger brand than Ashtrom. But since then, Ashtrom has grown and familiarity with the brand has become much stronger, and it was time to make this change, which is a natural change. In fact, the other companies in the group are all Ashtrom Properties, Industries, and only the residential sector remains with the old Ashdar brand.”
The name change, Fridman says, will not change the company’s operations, which will continue functioning in the same way. “Throughout the years, we have been very diverse, both in terms of the customers we address, the locations we build in, and also in terms of the types of deals we have done – cash, combination, urban renewal. We were one of the first large companies to enter urban renewal, and also the government price target and discount programs.”
“More cautious in setting delivery dates”
Like many companies in the industry and in Israel in general, Ashtrom has been greatly affected by the war. The company completely gave up on planning shared protected spaces for each floor in favor of protected rooms in each apartment. Fridman also says, “The war taught us that we may also be exposed to ongoing wars in the future, and therefore we are much more cautious in setting dates for the delivery of apartments.
“If in the past we thought that work on sites would stop for two or three weeks during a project, today schedules can be completely lost. There are a very large number of workers who do not return to work, and the state was not properly prepared to bring an alternative solution in a short time.”
How do you deal with manpower shortages?
“We are developers, but we feel it through the contractors, who inform us that they do not have manpower. They tell us that there is a shortage of professionals, that prices have increased greatly, and as a result, the pace of progress of the work is slower and construction takes longer.
“The extension of the construction period obviously has an impact on costs, in addition to the fact that the costs of the workers have increased and the costs of raw materials, which are more difficult to obtain.
“There are sometimes fights between contractors over manpower, and over professionals. Sometimes they are ‘hijacked’ from one project to another or try to provide a solution for both this project and that project. This is true not only in skeleton work and wet work, where there is a great reliance on foreign workers. There are also fewer foreign workers in other jobs such as plumbers and electricians, and without these professions we cannot complete the projects either.
RELATED ARTICLES
Gindi undercuts rivals with much lower Sde Dov prices
Housing purchases fall for third straight quarter
BoI Governor: Supply failure causing housing price rises
“Aluminum work, for example, is characterized by limited manpower, so the production of aluminum elements for windows and doors is at a slower pace, and then delays arise and delays continue all the time.”
How do you work with buyers?
“In two projects we are behind schedule, and we are working with buyers to reach compromises. Everything is aimed at avoiding conflicts.
“In general, we came to this war with a relatively small inventory of projects in execution and marketing in relation to the volumes that our company did in the previous years because we manage opportunities and risks. It turned out that in the last two years, the supply we had was at a 17-year low.”
What orders of magnitude are we talking about?
“When you take into account a two-three-year execution period, at any given moment we have about 2,000 housing units being built. In the last two years, we were at less than half that. So there are a very few projects that were halfway through, and today I don’t have dozens of projects that are stuck.”
“Amending the Sales Law is a terrible distortion”
To what extent does the increase in construction inputs offset the developers’ profit?
“When they amended the Sales Law and asked to link it to 40% of the apartment price, claiming that this is the part of the construction costs from the apartment price – they made a terrible distortion here, because there are projects in which the construction cost is really about 40% of the apartment price, but in urban renewal projects, and in projects in which the developer made a combination deal with landowners, the construction cost can reach 70%-80% of the total costs of the developer in the project, and then it is much more significant.
“On the other hand. When you buy expensive land, the construction component constitutes a lower percentage; when you go to the periphery and the land component is cheaper, then the construction component is higher again, and the company is more sensitive to an increase in construction inputs. So to your question, there is no single answer here.
“During the war, we have started many projects, because we believe that during their construction period, which is three to three and a half years, the situation will change and their profitability will increase.”
How will the profitability rise?
“We assume that the market will adjust, and adapt to the situation. We hear that another 3,000 or more workers from China will probably arrive in the construction industry, and we believe that some developers will not exercise their construction permits and there will be less demand for workers, because fewer projects will start. There are gaps between construction permits and construction starts.”
“Our assessment is that from now on the construction input index will not rise as dramatically as it has since the beginning of the war until today, and may rise again soon, following the next expected update.
“If that is the case, and the war ends, and the national mood and the economic situation in the country improve, we assume that demand will return to what it was before and what it should be as a result of population growth. Then apartment prices will also rise, we will receive more on the sale of the apartments, and we will not have to pay more for the construction costs and the profitability of these projects will increase.”
How do you explain the fact that there is a record supply of new apartments and the prices continue to rise?
“I think the measurement is inaccurate, because the prices do not sufficiently reflect the benefits given to buyers. The real price of apartments has fallen in my assessment in most areas of the country.
“Today, they offer payment terms for deferring payments until the end, as well as exemption from indexation in projects at the beginning. This sometimes means 10% of the apartment price. So if apartment prices increased by 6% and the value of the benefits is 10%, then in fact the real price declined by 4%. I have seen ‘buy an apartment and get a car’ promotions, subtract the value of the car from the apartment and you will find the real price of the apartment.
“I think that today, apartment prices are really at an opportunity. The benefits that the developers are giving are worth a lot of money.”
Why are developers offering 20% payment now and 80% on completion, instead of just lowering prices?
“The deals stem from the buyers’ need, because one of their biggest problems is the high interest rates. If the buyer is required to take out a mortgage now to pay the price of the apartment, his situation is worse than that of buyers who receive a discount, by postponing the payment for another three years, at an interest rate that will probably be lower.
“In addition, move-up buyers have always preferred to postpone payments until close to the occupancy date, when they plan to sell their apartment. The problem is that demand for second-hand apartments has decreased even more than the decline in the rate of sales of new apartments, and move-up buyers fear they’ll be stuck and unable to sell their apartment. “Postponing the payment date allows them enough time to look for buyers for their apartments, in the belief that with the end of the war, the situation in the sale of second-hand apartments will also improve and they will be able to find buyers.”
Do you use offers 20%-80% deals?
“We use this method, and not 10%-90%. We are sending them today to take out a contractor loan from a mortgage bank for about 50% of the price of the apartment. We are actually already receiving 70% at this stage (20% equity and another 50% contractor loan).
“Although we subsidize the interest for this period until delivery, meaning that from the customer’s perspective, he will really see that he has to pay the 80% in the end, he will already be examined by the mortgage bank today to see if he is able to meet such mortgage repayments. In fact, we are using this practice so that the mortgage banks can examine our buyers and whether they really have the ability to afford to buy the apartment.”
“We have significantly increased the inventory on the market”
Let’s get back to the record supply. Why are developers still building?
“The figure of 80,000 apparently unsold apartments is very worrying for developers, after all, in the past we had less than 40,000 apartments. But how many of these 80,000 have been completed or are nearing completion, and how many are at the beginning of the road?
“Let’s start with the fact that someone who has sold most of his apartments in the project and is left with the last apartments in the projects does not have to worry. They can finish the project with a few unsold apartments, end the bank support, repay all debts to the bank, because the equity plus the profitability that the bank demanded are worth orders of magnitude of 30%-35% of the project’s scope (about 15% each).
“That is, if you are left with 15%-20% of the apartments, the bank has no problem. It is protected. You have to decide whether you want to sell these apartments at a significant discount, or wait a little longer for the situation to improve. In the projects that you started recently, where the construction period is three years, you do not have to sell all the apartments this year. You will sell less this year, and the question is what you believe will happen in two years time.
“I think there are those who do not have the ability to start new projects, because they present too low profitability, and they are not able to get the project off the ground with the lending bank.
“But those who can do it, really believe that during the construction period in the next two or three years, the situation will improve because the war will end, and usually after economic crises, after Covid, and after wars, there has been a boom. The market returns to activity very quickly. What you are seeing now indicates that developers are not just talking. They are starting projects.
“We have significantly increased the inventory that we have put on the market over the past year. Just this week we demolished buildings in Ra’anana and set out to build another project. We are putting out more goods even if we don’t sell in the coming months the amount we would like to sell. We believe that in six months, a year, or two years, the situation will improve. This year we have put out over 30 projects for marketing. This is a very large number, if not the largest in the market, compared twith competitors.” The interview with Fridman took place before Gindi Holdings announced last week that it would sell apartments in Sde Dov at prices starting at NIS 49,000 per square meter. When subsequently contacted, he was certainly not surprised.
Why didn’t you buy land at Sde Dov?
“We bid in the first round. In our analysis, the state is acting like a speculator here. Instead of putting out many lots in one tender, for competition between dozens of developers with a very large supply of apartments, the state issued a first tender for 2,000 housing units. Four or five developers won it. The state waited six months and issued another tender.
“Obviously, those who bid later looked at the first ones and said – let’s offer a little less. And now it turns out that the prices of the land are actually falling, and that the first ones who entered there are getting burned. The state is not finished – there is more land there to market in the next tender, at lower prices.
“It is possible that the first ones who marketed there managed to sell at a high price, but we asked ourselves what the price will be in three years, when construction begins, what the price will be in four years?
“The first developers who won also suffered big delays, because there was no approved design plan. In the end, those who purchased in the second tender will build more or less in parallel with those who won the first tender. The supply there will be very large, so the sales prices will drop.”
What is your assessment of the sales prices there?
“Again, the question is how quickly the remaining land will be marketed. In our assessment, the prices there will not be NIS 80,000 per square meter, as stated in the business plan of some of the developers, but closer to NIS 60,000-65,000 per square meter.”
Published by Globes, Israel business news – en.globes.co.il – on June 9, 2025.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.
