The Israeli housing market remains a boil, figures from the government released on Monday showed, with people buying some 23,000 new homes in the first eight months of the year – an increase of more than 63% from the same time in 2014 and equal to the pace of new-home sales for all of last year.
As powerful as it was, the buying frenzy failed to keep pace with the supply of new houses still unsold, which grew slightly in the January-August period.
The CBS figures also showed that the sales of new houses were capturing a bigger and bigger portion of the market – some 30% this year, compared with 22-23% in 2011-14 and a traditional share of about 20%. In July and August, the figure shot up 50% from June.
Building sources explained the growing number of new homes to a plethora of new residential construction in Israel’s north and south, much of it low cost, in places like the new town of Harish, Kiryat Gat, Ashkelon and Afula. Buyers prefer new construction over older homes, they said.
The housing figures come as the government is struggling to contain an overheated market, where not only sales are rising but prices as well, endangering the ability of middle class families to afford a home of their own. In addition, policy makers are worried that the record level of mortgage borrowing risks banks and buyers’ financial stability.
On Monday, the Bank of Israel reported that new mortgages reached 4.2 billion shekels ($1.1 billion) in September. That was a sharp drop from August, when home loans soared to 6.2 billion shekels, but it was nevertheless a high figure testifying to continued strong demand for home loans, especially in a period when there were relatively few business days due to the High Holidays. New mortgages in the first nine months of the year grew to 49.2 billion shekels, the central bank said.
Part of the demand the market is feeling now is due to the temporary lull in 2014 when then Finance Minister Yair Lapid sought to exempt many homebuyers from the value-added tax. Before his effort failed, the promise of sharper lower prices and the uncertainty that created put the market in a standstill, leaving a lot of pent-up demand in 2015.
Operation Protective Edge, the 50-day war Israel fought with Hamas in the Gaza Strip, also depressed the market last year.
In some respect, the rapid pace of home sales this year is simply a matter of the market returning to its former growth trajectory. In 2013, home sales reached close to 25,000 units, a level that will be exceeded this year even though the economy has been slowing.
The areas of biggest growth for new-home sales were Haifa and the north, where sales were about 3,500 and 2,150, respectively, according to the statistics bureau – the highest pace in four years. Tel Aviv saw 3,970 units sold, more than the full-year totals in 2011-13 and near the full-year 2014 level.
The stock of new homes still unsold at the end of August was 27,960, amounting to a nine-month supply at current rates of sales.