The first quarter of 2015 was the second-best quarter for home sales in 15 years, just slightly below the record set in the final quarter of 2013. A big part of the growth was due to property investors rather than people looking for a place to live.
Figures from the Finance Ministry released on Sunday showed that 10,500 homes were purchased nationwide in March, bringing the first-quarter total to about 32,000. Not only were investors responsible for much of the rise in the first quarter, but the trend was led by what the treasury called “apartment collectors” – people owning more than one investment property.
“An analysis of investor behavior in March and since the start of 2015 finds a higher level of investors who have bought more than one property for investment than any time in the last decade,” the treasury said. “On average over the last decade, the rate of investors buying more than a single property was about 23%, while in March the rate was 33%.”
The figures come as Moshe Kahlon, the finance minister-designate, has signaled he wants to crack down on residential real estate investment to rein in soaring home prices. Over the weekend, Kahlon told Israeli television’s “Meet the Press” he supported such a measure to increase the supply of housing for first-time buyers, but refused to say how much of a hike he sought.
The plan, however, was met with criticism from economists and real-estate industry figures. Excessively high tax rates are likely to cause people to find ways to evade it – for example, people listing their investment properties under their children’s names, said Dr. Michael Sarel, a former treasury chief economist who quit in protest over former Finance Minister Yair Lapid’s plan to exempt many first-time home buyers from the 18% value-added tax.
“The lesson is not to create massive difference in taxation, because people will simply find a way around it,” added Sarel, noting that given the high purchase tax rate already in force, the government should cancel the tax on rental income, which is hard to collect in the first place.
Nehama Bogin, a property appraiser, said she was certain taxing investors would do nothing to help redress the supply-demand imbalance in the real estate market.
“We need to concentrate exclusively on aiding young couples [first-time home buyers] who haven’t succeeded in buying a home and whose dream of buying one is growing more distant with every election,” she said. “There’s no choice but to admit the only solution is to take care of land supply by making more available in the center of the country and in high-demand areas.”
As for the spurt in investing, the treasury attributed it to an easing of the improvement-tax levied on investors in 2013, which allowed them to sell homes with either a complete exemption or much lower rate. After selling off their properties, they came back in 2015 to buy new ones.
In fact, the percentage of homes bought in March by investors declined slightly for the second month. After peaking at 30% of all homes bought in January – an unusually high figure – the rate declined to 24% in March, the treasury said.
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