First-quarter home sales figures released on Tuesday show that Finance Minister Moshe Kahlon has its work cut for him in trying to stop Israelis from buying residential properties for investment.
The Finance Ministry’s chief economist reported that purchases of homes shot up 24% in the first quarter of 2015 from the same period in 2014, to about 32,000 units. They were up 13% from the final quarter of last year when the market began rebounding from a brief downturn caused by hopes the value-added tax would be canceled on many home sales.
Investors accounted for an outsized 27.5% share of the purchases, or 8,800 homes, compared to 31.5% in fourth-quarter 2010.
“The investor segment of the market is what led the growth in home sale in the first quarter with a rise of 25%,” the treasury said. “Both in unit terms and in their share of the market, investor activity reached a level not seen since the final quarter of 2010.”
First-time home buyers — “young couples” in government parlance, the market segment Kahlon is hoping to help — bought 11,000 homes in the first quarter, a 12% increase from the last three months of 2014 and a slightly slower increase than the overall market.
The figures come from the three months just before Kahlon took office, but more recent data confirm that the property market remains overheated despite the finance minister’s effort to move quickly to address the housing crisis.
Israelis took out 5.76 billion shekels ($1.5 billion) in mortgages in May, an increase of 29% over May 2014.
Kahlon already has cabinet backing for plans to streamline building approvals and plans to raise the purchase tax on second homes, which real estate experts say will raise the cost of buying an investment property by 3% on average.
Investors have been storming the property market because low interest rates leave them with few options in bank deposits or the bond market. Industry sources have warned that in the weeks before the Kahlon plan is expected to go into effect, there will be a surge of investor buying.
The Be’er Sheva and Netanya regions led the way in home buying, with Be’er Sheva showing a 28.3% increase over the fourth quarter of 2014 and Netanya a 27% rise. Be’er Sheva home sale got a big lift from the Carmei Gat project in nearby Kiryat Gat, where 5,345 units were sold in the quarter, 1,400 of them to investors, the treasury said.
The Tiberias and Haifa regions saw declines of 9.7% and 1.6%, respectively, in the number of home purchases.