Israeli Home Prices Resumed Rise in 4th Quarter as Zero-VAT Plan Fizzled

Modest average rise belied big annual increases for some cities, most notably Jerusalem and Be’er Sheva.

Tomer Appelbaum

Home prices resumed their rise in the fourth quarter of 2014, as buyers lost patience with former Finance Minister Yair Lapid’s so-called Zero-VAT plan and returned to the market, the Office of the Government Assessor said Monday.

Prices rose a modest 1.1% in the final three months of the year, after virtually no change in the previous quarter when buyers held off purchasing a home in anticipation of Lapid’s plan to exempt many first-time buyers from the 18% value-added tax.

However, it never won Knesset approval after Prime Minister Benjamin Netanyahu fired Lapid and called an election for March.

“Whoever listened to the government’s promises over the past year lost on average 65,000 shekels [$16,600],” said Ohad Danus, chairman of the Real Estate Appraisers Association. “Most of those who waited lost a lot more. Because prices are so much higher I would cautiously estimate at 2 billion shekels the loss to the 30,000 families who sat on the fence.”

The price of homes, which the assessor estimates have risen more than 40% since 2008, have become a political lightning rod ahead of the election, which has been focused on cost-of-living issues. The state comptroller is due to issue a report this week on the failures of housing policy under the governments of Netanyahu and Ehud Olmert, which is which may stoke more controversy.

The relatively modest fourth-quarter rise didn’t apply to many of the 16 cities surveyed by the assessor. Moreover, the 5% increase in home prices over all of 2014 stood in stark contrast to overall deflation.

In Be’er Sheva, which has attracted buyers who can’t afford houses in the greater Tel Aviv area, they rose 5% in the three months from the third quarter, to an average of 897,000 shekels for a four-room property, the assessor reported.

In Tel Aviv, where prices had moderated slightly in the first nine months of 2014, they resumed rising in the final quarter by 1%, to an average of 2.734 million shekels for four rooms.

In Haifa, prices dropped 3% in the quarter but were up 4% for the year, to an average of 1.316 million shekels. Jerusalem prices also fell 3% in the quarter but jumped 7% for the year, to 1.876 million.

Government Assessor Tal Alderotti attributed the renewed price increase to the abortive Zero-VAT plan, which Lapid – currently campaigning as head of Yesh Atid – vowed this week to revive if he joins the next government.

“Home buyers ... began to lose confidence in the government’s ability to lower housing prices,” Alderotti said.

One of those other programs was so-called Target Pricing, which the government did approve. It aims to lower housing costs by selling state-owned land at a discount to contractors, who then pass on the savings to home buyers.

However, an examination by TheMarker found that the two tenders announced with great fanfare on December 30, for land to be sold under the Target Pricing plan, have yet to move forward.

The Israel Land Authority website published general terms for tenders to build 446 houses in Rosh Ha’ayin and another 525 in Modi’in, but never released the relevant documents for contractors to make bids.

With reporting by Nimrod Bousso