Finance Minister Moshe Kahlon’s attempts to cool soaring home prices has caused huge gyrations in the markets, but the bottom line is that home purchases rose to a record 120,000 transactions, figures released by the treasury on Monday showed.
- Israel to Step Up Demolitions of Illegal Structures in Arab Sector
- The Price Israel Pays for Having a Powerful Army
Citing preliminary figures for 2015, the treasury said first-time buyers – or young couples as they are commonly called – stormed the housing market in the first half of the year after a hiatus in home buying the year before as buyers waited for a plan by the previous finance minister, Yair Lapid, to exempt many categories of home purchases from the value-added tax.
Kahlon created his own panic when he announced last spring he was raising taxes for property investors in a bid to deter them from crowding out other buyers. News of the impending tax hike caused investors to lock in purchases in June before the higher taxes went into effect, the treasury said.
When they did, investors dropped out of the market during the third quarter. Meanwhile, however, young couples opted to delay buying a home in anticipation of another Kahlon plan to lower housing prices – the Machir L’Mishtaken program.
As a result, home purchases dropped on average 24% year on year in the second half of 2015, the treasury said. However, the number began to shoot up in the final weeks of the year, with home purchases up 28% in November from a year ago to about 9,900 transactions.
The treasury said the end-of-the-year surge was driven by Kahlon’s nemeses, property investors, who accounted for about a fifth of all transactions for the month.
The housing figures are the latest in a string of disappointments for Kahlon, who vaulted to a strong Knesset position in last year’s elections and to the finance portfolio on the promise of reducing housing prices and the cost of living.
In housing, Kahlon has launched several programs, but they have yet to have an impact. Although construction starts have grown, home prices in the 12 months through November increased 7.6%, according to the Central Bureau of Statistics.
“Investors are returning to the market because, among other things, they have no [investment] alternatives in the stock market,” said Arnon Friedman, CEO of property developer Ashdar.
He said figures from the treasury showing that purchases of second-hand homes shot up 38% in November from the month before, with the biggest rises in the Negev and Galilee peripheries, was evidence that people had lost faith in the government to solve the problem of rising home prices.
Purchase in the northern Sharon area, which incudes towns like Hadera and Harish, were up 60% in November from October. They were up 38% in the Galilee, including Haifa and up 11% in the great Tel Aviv area.
“People without homes, who had waited for the new government to help them and can’t afford to spend more than 1 million shekels [$250,000], simply gave up,” he said.
The treasury indicated that the presence of property investors in the market was greater than the official figure of 20%, which is based on people who already own a home buying a property. Officials said there were signs of what they called “camouflaged investors,” who rent their primary residence, and buy and sell homes speculatively, often at a rapid pace.
“It was clear investors would come back to the market. The purchase tax increase didn’t deter them from investing in this area, especially at a time when the stock market is volatile. Real estate is seen as stable and surer,” said Or Shavit, CEO of Engel Shavit Smart Real Estate Buying.
Rony Cohen, CEO of Eldar Real Estate Marketing, predicted that the coming months will likely see growing numbers of property investors in the market. He said young couples won’t drop out either.
“Home buyers are fed up with government promises. They understand that the odds of their winning the lottery in the Machir L’Mishtaken program are the same as getting a call from Ariela from Mifal Hapyis,” he said referring to the pitchwoman for the national lottery.