Home Sales Hit Highest Level in a Decade in December

Many of the purchases were by first-time home buyers, with one project in Rosh Ha’ayin accounting for 800 units.

Israelis bought 13,400 homes in the final month of 2013, the highest monthly figure for sales since the start of the previous decade, as first-time home buyers piled into the market, the Finance Ministry reported.

The huge increase in home sales -- a 23% rise from December 2012 and jump of 47% from November -- was due to heavy selling of homes by property investors as well as the marketing of a very large new project in Rosh Ha’ayin, the treasury said. Some 800 units alone were sold in the Pisgot Afek neighborhood of Rosh Ha’ayin through the Hever consumer organization for members of the security forces.

The major increase in home sales was by first-time home buyers, dubbed “young couples” in the industry. While the increase in that category was felt in all parts of the country, it stood out in particular in areas where the prices are lower than the national average, said the treasury. For example, sales in the Be’er Sheva region almost doubled among young couples.

“Young couples have lost confidence in the government,” said Haim Feiglin, CEO of property developer Zemach Hammerman. “Since 2008 every housing and finance minister has promised that housing prices will fall, but they keep rising. The minute young couples recognized that, they got off the fence.”

But many observers said December’s surging home sales most likely reflected a one-time rise and that the market may be cooling off. The government has been seeking to contain the rise in home prices by increasing the supply of land available for construction and by restricting mortgages.

If the Rosh Ha’ayin project is not included, then new home sales rose only 5% in December compared to November, and actually fell when compared to December a year earlier. Moreover, preliminary home-sales figures for January 2014 show a steep drop in purchases, compared with both the month before and a year earlier.

Also, the number of people buying homes as an investment fell by 22% in December, after almost five consecutive months of an increase. Sales by investors climbed 64% from November, much of which could be attributed to the cancellation of the exemption from capital gains taxes on homes as of January 1.

“The December 2013 rise wasn’t unusual and was similar to previous years,” said Irit Shlomo, a strategic adviser to Meitav Dash Mortgages, noting that at the end of the year many contractors offer deals for tax purposes. “It doesn’t testify to any kind of trend and major development in the market,” she said.

Meanwhile, the Bank of Israel reported that the public took out just 3.77 billion shekels ($1.07 billion) in mortgages in January, a 12.5% drop from the month before. It was not a relatively low figure for January, but was considerably lower than the average amount of mortgages taken out last year each month was 4.3 billion shekels. Last month’s figure was also 5 percent lower than that of January 2013, when the public took out 3.97 billion shekels in mortgages.

But rather than signalling a cooling of the overheated real estate market, mortgage bankers attributed the drop in home loans to a strike in the Land Registry (Tabu) offices during January, which delayed the completion and registration of many home sales.

In addition to the Land Registry strike, they also ascribed the drop to the tougher mortgage terms instituted by the Supervisor of Banks at the Bank of Israel, which among other things ban banks from granting mortgages whose monthly repayments were greater than 50% of the borrower’s monthly income. Since the new rules took effect last November, new home loans have dropped 6% to a monthly average of 4.02 billion shekels.

Dreamstime.com