Israeli Home Purchases Up 32% in May, Buoyed by Scrambling Investors

Some 12,400 homes change hands in May - a record for the past decade - as buyers scurry to complete deals before June 1 VAT increase; figures are likely an exception, not a new trend.

Nimrod Bousso
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Nimrod Bousso

There was a sharp increase in the number of homes purchased by investors in May − 53% more than in April, according to the Finance Ministry’s summary published Thursday.

In general, the number of transactions in May was up by a sharp 32% compared to April. Some 12,400 homes changed hands in May − a record for the past decade − as buyers scurried to complete deals before VAT increased June 1. There was a 64% increase in the number of new home purchases, and a 24% increase in the purchase of secondhand homes.

However, the May figures are likely an exception, not a new trend.

“Initial figures for June indicate a sharp drop in the number of purchases compared to May, particularly for new homes,” says the report.

Investors accounted for 23% of all purchases − up from 19% in May − after their percentage of the market had dropped continuously since last September. “We can presume that the sharp increase in purchases by investors was motivated partially by the Bank of Israel’s move to cut interest rates and the increase of VAT in June,” states the report.

Investors increased their presence particularly in Be’er Sheva, after their market share in the southern city bottomed out in May. Many first-time investors were buying, too − 73% of people buying an investment home in Be’er Sheva in May had not owned an investment home in the previous 10 years, according to the report.

Nationwide, the number of first-time investors buying homes in May increased only by a moderate 2 percentage points.

The other big group of people buying homes was second-time buyers, states the report. “They bought 50% more apartments in May than in April,” it reports, adding that they were likely motivated by Finance Ministry plans to potentially increase the taxes on homes bought by second-time buyers.

So who wasn’t fueling the market in May? First-time buyers, apparently. The number of first-time buyers buying homes increased by only 7%, according to the figures. There was a drop in the number of homes purchased by these buyers in peripheral regions, including the Shfela and Be’er Sheva, and a significant increase in Haifa and Tel Aviv.

Ohad Danus, chairman of the real-estate appraisers association, called the statistics a strong argument that the country lacks homes. “The unprecedented increase in May home sales beats out all the non-technocrat voices in the government ministries that are arguing you can’t see any lack of supply in the housing market, ‘since no one’s still living in a tent.’ The lack is strong − for both rental apartments and apartments in general. If all it takes is a 1% increase in new home prices to drive such a rush into the market, then the lack is even larger than what many think,” he said.

Inrom Construction Industries looks likely to cash in from increased construction of new housing units.Credit: Tomer Appelbaum