Israeli Home Buyers Storm Market in December

Sales of new homes reach their highest level in a decade as buyers doubt the government will rein in prices.

Ofer Vaknin

December saw home buyers storm the real estate market, snapping up more new dwellings than in any time over the last decade, treasury figures released Sunday showed. In December, 3,500 new homes were sold.

All told, about 11,000 homes were bought that month, a 17% jump from November, which itself marked a 37% increase over October, the treasury said. That put the figure behind the December 2013 all-time record of 13,000 sales,

Purchases of new homes made up 32% of the total, far higher than the typical 20% to 25%. New-home sales jumped 40% in December from November, extending a 24% increase in November from October, the Finance Ministry said.

The surge comes after former Finance Minister Yair Lapid’s plan to exempt many new home buyers from the 18% value-added tax collapsed and the government called an election. Buyers and builders had been waiting for the Knesset to approve the zero-VAT law, with sales and construction declining much of last year.

“After young couples realized that nothing was going to change, they still needed a home, so they returned to the market,” said Haim Feiglin, CEO of the residential property developer Zemach Hammerman. “I can only hope that the next government will learn the lesson of the outgoing government and stop destructively intervening in the real estate market.”

Erez Cohen, a former chairman of Israel’s real estate association, said the figures showed that the public had lost confidence in the government's ability to solve the housing crisis, but also that people had no better place to invest in right now.

“More and more Israelis feel they’re being left out of the real estate game,” he said, citing figures showing that the percentage of Israelis living in their own homes had fallen in the last two decades to 65% from 74%.

“Even a modest apartment in the country’s outskirts has become a luxury product,” Cohen noted.

The home-buying mania struck all of Israel except Tel Aviv. The biggest increase was in Be’er Sheva, where the number of home sales doubled from November, the treasury said. New-home sales to first-time buyers surged 150% in Be’er Sheva.

Investing in residential properties showed continued signs of decline, with the percentage of homes bought by investors dropping to 21% in December, the lowest level in years. Investors bought 2,300 units, a 9% decline from November.

Preliminary data for January showed a decline in the number of home sales as potential buyers look to the government formed after the March 17 election to introduce programs to contain skyrocketing housing prices.

But Eran Rolls, chairman of the company Israel Building Center, said he doubted that the cooling-off would last long. The figures show that there is no way the government can cool demand for housing over the long term, he said, adding that  particularly first-time buyers had flooded the center’s last housing fair in December.

“People are sobering up. They don’t believe the government’s promises about lowering home prices,” he said. “Buyers understand that until a new government is formed and it devises new plans to lower prices, prices will keep on rising.”