Israel's Housing Market Was Already Cooling Before Coronavirus Crisis

Excluding subsidized housing, developers’ sales tumbled 11% in February compared with a year earlier, and of course things will only get worse

Hadar Kane
Hadar Kane
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Apartment buildings in the neighborhood of Afula, June 14, 2019.
Apartment buildings in the neighborhood of Afula, June 14, 2019. Credit: Gil Eliyahu
Hadar Kane
Hadar Kane

Israel’s housing market was showing signs of slowing already in February, before sales dropped even further as the coronavirus lockdown set in, according to the Finance Ministry’s chief economist, Shira Greenberg.

A review by Greenberg focuses on February, so it does not fully reflect the current state of the housing market, which has been sent into a near complete freeze.

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“Initial statistics for March show a sharp drop in the number of transactions for new homes and already-existing homes,” the report says. “The drop is the sharpest since July 2015, which saw a low point in the number of transactions after investors hurried to finish transactions in June, before tax increased.”

Some 9,300 apartments were purchased in February, a 3% increase from February 2019. Excluding transactions in the Mehir Lemishtaken subsidized housing program, the number is 7,900 – a 2% fall compared to last February and a 7% drop from January this year.

As opposed to the preceding months, there were relatively few transactions not just for already-existing apartments but also for new apartments sold outside the government’s housing programs.

Tel Aviv lux buildings.Credit: Dreamstime

Developers’ sales on the free market tumbled 11% compared to February 2019, coming after a 20% surge in recent months and a 12% increase for all of 2019.

First-time buyers bought some 4,700 apartments in February, including 3,300 on the free market. This is a 1% decrease from February last year.

Notably, there was a 12% drop in purchases by first-time buyers in the center of the country, with high-tech workers represented disproportionately among the buyers.

All told, around 3,300 new apartments were sold in February, a 7% increase from last February, but most of that rise is due to the Mehir Lemishtaken program. There were only 1,900 new home sales on the open market, an 11% decrease compared to last February and a 15% decline from January this year.

This fall is the sharpest since August 2018, but the picture is not uniform for the entire country; sales volume fell in only half the regions analyzed in the paper.

The drops are particularly sharp in the north and center – down 22% compared with last February. But in Tel Aviv, new home sales nearly doubled. New home sales surged 30% in Jerusalem, but this is largely due to purchases by real estate investment funds.

The review shows that real estate investors did significantly fewer deals right before the coronavirus crisis, thus the number of apartments owned by investors continues to fall, a trend that could deepen during the current economic crisis.

Investors own the majority of apartments available for rent in Israel. Investors bought some 1,200 apartments in February, a 10% decrease from February 2019 and a 12% decrease from January this year.

Investor purchases dropped in most geographic regions except for Tel Aviv and Jerusalem. Excluding the real estate investment funds,  investment purchases in Jerusalem fell 9%.

Investors accounted for 13% of all home purchases in February, down from 15% in February 2019. As of that month this year, investors owned some 620,000 apartments in Israel.

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