Ultra-Orthodox couples fuel Israel's recent real estate boost
The social protests of last summer are fading from the public consciousness, and the housing sector is back at the sales volume observed during the peak years of 2009 and 2010.
Who says young couples don’t have money to buy apartments? They flooded back into the market in the second quarter of the year, purchasing 19% more apartments than they did in the second quarter of 2011, and 8% more than in the first quarter of this year, according to data published by the State Revenue Administration. Investors also came back into the market, and purchases of investment apartments have been on the increase for six months running now, for the first time since 2009.
It appears that the social protests of last summer are fading from the public consciousness, and the housing sector − one of the protests’ main targets − is back at the sales volume observed during the peak years of 2009 and 2010. The price of new homes decreased in the second quarter by 0.8% versus the first quarter.
That said, the State Revenue Administration’s data is different from that collated by the Central Bureau of Statistics and the state appraiser − it is based on the sales prices of new homes (as opposed to second-hand homes) and it calculates the median price, not the average.
The price drop in the center of the country was minor − only 0.1%, according to the report. Price drops were lower than the national average in the Be’er Sheva region (0.5%) and the Jerusalem region (0.6%), too. The drops were higher than average in the Sharon region and the internal plain, at 1.2%. Over the past 12 months, the median new home price dropped 10.9%.
Haredim pushing up prices
The report makes note of one of the most important factors affecting the market − who the buyers are − and less on how prices changed. There was a 12% increase in transactions in the second quarter, after four consecutive quarters of decreases, it noted.
In total 24,500 apartments were purchased in the second quarter. The most significant increase based on region was in and around Jerusalem, where 807 new homes were purchased, most of them in ultra-Orthodox developments in Beit Shemesh.
Another area that saw significant growth was Tiberias, which has been flourishing in the past few quarters. A total of 834 new and second-hand homes were sold in that region in the second quarter − a 45% increase versus the second quarter of 2011 but less than the 907 sold in the first quarter of this year. Here, too, the jump is attributed to Haredi buyers.
The report’s most notable finding is the impressive jump in purchases by young couples. This is the first time in five quarters that the number of purchases by young couples increased. Even if it’s too early to point to a trend changing direction, this figure deserves note, particularly given how difficult it has become for young couples to afford a home.
In total, young couples purchased 10,200 homes last quarter, which works out to 42% of all purchases. How is this possible? Apparently, even today there are places where they can afford to buy. While the report does not give a geographic distribution of this sector, it does note a sharp increase in purchase in two locations: Beit Shemesh, which caters to the ultra-Orthodox community and where buyers paid NIS 884,000 on average, and Ashkelon, where young couples paid NIS 889,000 on average.
“We can presume that the relatively low prices in these two locales were among the factors contributing to the increase in purchases by young couples, given that mortgage financing terms are becoming tougher, making it particularly difficult for this population to afford a home,” states the report.
Young couples buying in Tel Aviv paid an average of NIS 1.65 million; in the Sharon region they paid NIS 1.4 million; in the Jerusalem region, NIS 1.2 million; in the center of the country (Petah Tikva, Holon, Ramat Gan, Givatayim and Kiryat Ono) they paid NIS 1.15 million; in the Haifa region, NIS 700,000; and in Be’er Sheva, NIS 650,000.
More investors, fewer foreigners
There was a slight increase in purchases of investment apartments that quarter. After five quarters of steep drops, investors purchased more homes last quarter than in the first quarter of the year, accounting for 5,500 transactions, or 23% of the total.
Yet investors’ share of the market is far from its peak of 33% in 2009 and 2010, a figure that deeply concerned the government and the Bank of Israel, which concluded that the overabundance of investors was a key factor in pushing up home prices. “We can presume that the return of investors to the market was motivated by factors including the decrease in real interest rates, after they increased steadily starting in the third quarter of 2009 and through the final quarter of 2011,” the report states.
Investors’ preferred destinations included Haifa, Tel Aviv, the Negev − particularly Be’er Sheva, and the internal plain, including Modi’in, Rishon Letzion, Rehovot and Yavneh.
Foreign residents purchased 809 homes last quarter, a 7% decrease from the first quarter of 2012 and 3% less than in the second quarter of 2011. Some 36% of homes purchased by foreign residents last quarter were in the Jerusalem region, where they accounted for 10.5% of all homes purchased.