The Israeli real estate market saw an explosion of activity in the first quarter, with house sales reaching their highest level in 15 years. The value of new mortgages also rose sharply last month, government figures released on Monday showed.
The Finance Ministry said some 10,500 homes were bought in February, the fourth month in a row in which the figure exceeded 10,000. The number of homes bought was down 3% from January, but the treasury said preliminary figures for March showed a big increase.
All told, officials said they expected some 35,000 new and used homes to have been reported purchased for the first quarter. That would break the previous recent high of 32,000 in the fourth quarter of 2013, and mark the highest level since 2000.
Meanwhile, the Bank of Israel reported on Monday that Israelis took out 5.6 billion shekels-worth ($1.4 billion) of new mortgages last month, a 27% increase over the monthly average for the previous 12 months.
Economists say the red-hot housing market reflects not only a shortage of housing stock but also a lack of confidence that the government can do anything to rein in rising prices. Property prices will rise this year as much as 7%, according to the Association of Contractors and Builders in Israel.
The latest surge in buying and borrowing began last autumn, after former Finance Minister Yair Lapid’s plan to exempt many buyers from the 18% value-added tax collapsed. The market had slowed in anticipation of the “Zero-VAT” plan, which was aimed at reducing prices.
Mortgage borrowing has increased also in response to a government campaign to push people with Housing Ministry loans to trade them in for bank mortgages, which are now cheaper thanks to record low interest rates. Interest on the government-based loans, of which 18 billion shekels are outstanding, is 4% linked to inflation.
The Bank of Israel said that, in the first quarter, 614 billion shekels of government mortgages were traded in for bank loans – 320 billion shekels in March alone. Even so, new mortgages taken out last month were still up 21% from the 12-month average, it noted.
As housing prices in the greater Tel Aviv area have risen out of the reach of many middle-class families, buyers have been snatching up properties further afield. Earlier in the year, it was the new city of Harish, some 70 kilometers (43 miles) north of Tel Aviv; in February it was Kiryat Gat (56 kilometers south of Tel Aviv) that drew buyers, according to the treasury.
Home buying in March for the Be’er Sheva area, which includes Kiryat Gat, jumped 121% from a year ago, to more than 1,000 units – the highest since the start of 2002. Much of the interest was focused on the new Carmei Gat neighborhood being developed in Kiryat Gat, which is home to a giant Intel chip-making plant.
Four-room apartments in Carmei Gat, which had been selling for 850,000 to 900,00 shekels, are now selling for more than 900,000 shekels, real estate sources said.
The treasury said that much of the buying wasn’t being done by young couples – the government’s designation for first-time home buyers – but by investors and, more likely, parents of young couples.
Treasury figures indicated that buyers preferred new but cheap properties. Purchases of secondhand homes were down 6% in February, following a 3% decline in January, while purchases of new homes rose 4% thanks to the Carmei Gat project.
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