First-time Buyers Prominent as Home Sales Reach Highest Level in Decade

Government programs for young home-buyers in Jerusalem, Harish and Beitar Illit help increase purchases by first-time buyers by 30%.

Home sales rose to a 10-year high in the second quarter as young couples snapped up properties, the Finance Ministry said on Thursday.

The number of new and used homes bought in the April-June period jumped to 31,619 units, a 24% increase from the first quarter and a 29% rise from a year ago, according to Finance Ministry figures. The figures matched a record from the beginning of the last decade.

Home purchases by young couples -- defined as people buying a home for the first time -- increased by 30% quarter on quarter, reversing a decline over the previous six months, the treasury said.

“The public isn’t stupid. People are starting to understand that home prices aren’t going to fall a shekel and there are no better investments, not in the capital market, not in the stock exchange and not in alternative investments,” said Avraham Kuznitsky, chairman of property developer Minrav. “Were seeing a wave of people not ready to wait any longer who are running to buy a home, so prices will keep rising.”

The treasury ascribed the sharp increase on home buying by young couples to three massive residential-marketing programs under way -- Katzir-Harish, a city being developed in the Galilee; another in the ultra-Orthodox town of Beitar Illit. A third program in the capital, known as the ”Jerusalem Grant” initiative to help first-time buyers, spurred a 40% increase in home purchases by young couples in the city.

Dror Toren, deputy CEO of American Israel Investments, said the fact that buying was concentrated in a few areas suggested that the residential real estate market may not be as strong as the treasury figures signal.

“The treasury looks at figures but we look at the market and it’s subdued. We’re not seeing sharp increases,” he said. “The market has been quiet of late, without rise or fall, which is good for everyone. That’s how a normal market looks.”

Outside these three incentive areas, another area noticeably popular with young couples buying homes was Be'er Sheva. According to the Finance Ministry report, the three areas also experienced a significant decline in home prices that may have contributed to the increased demand by young couples, compared to the other areas in the country were housing prices held steady. Sales in the center of the country also increased, but much more moderately.

Finance Ministry officials explained this moderate increase in sales in the center of the country as stemming from increasing prices. In particular, prices in the Rehovot-Rishon Letziyon-Modi'in-Ashdod region jumped 11% between 2012 and 2013.

Prices in Harish were particularly buyer-friendly, with the average price of a new house there in the second quarter just NIS 682,000, 43% less than the average paid for new homes bought by young couples nationwide.

Toren said the activity in the periphery markets such as Harish and Be’er Sheva reflects a natural development of the real estate market as less and less land is available in the center of the country. “If once Yavne was considered the end of the world, over the years it’s become a suburb of Tel Aviv,” he said.

Among investors -- defined as people buying a second house -- home sales grew by 20%, a rise the treasury attributed to an increase in the value-added tax that went into effect in June, which prompted a sharp increase in home purchases the month before. Although that marked a turnaround after a sharp decline in the January-March quarter, figures showed that investors were less avid buyers of residential properties than in the past.

Investors were selling off property, but not buying. While the sale of homes by investors rose a sharp 33% from the previous quarter, investors accounted for the lowest proportion of home purchases since 2003. A large portion of homes being sold are going to young couples, suggesting that a program encouraging such sales was succeeding.

Tomer Appelbaum