Voters apparently aren’t impressed with campaign promises to bring down the high cost of housing: In January, as the election campaign was getting under way, Israelis stepped up their purchases of new homes to a near record rate.
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The Central Bureau of Statistics reported on Sunday that Israelis bought 2,452 new homes in that month, 17.3% more than they did in January 2014. The figure was down slightly from 2,530 in December, but December is traditionally a peak buying month, while January is not.
In any case, both months showed a sharp increase in new home sales compared to the second half of 2014, when a slowdown in sales set in after fighting broke out in Gaza and buyers waited to see whether former Finance Minister Yair Lapid’s plan to eliminate the value-added tax for many home buyers would win Knesset approval. It didn’t, causing home purchases to surge.
CBS figures showed that new home purchases fell to about 1,600-1,700 units per month in July and August last year when Operation Protective Edge was raging. The figure rose to 1,812 in September right after the fighting stopped, 1,982 in October and 2,208 in November as Prime Minister Benjamin Netanyahu called an election .
Because the number of home sales continued at high levels in January, the figures indicate that the market was no longer just reacting to the failed policies of the old government but skepticism concerning any new government as well.
Meanwhile, a report released by the Finance Ministry’s covering the entire residential real estate market – not just new homes – found that about 10,800 sales of new and second-hand homes occurred in January, down from December but still one of the highest monthly totals in the last five years.
The treasury reported that the number of first-time buyers, known as “young couples,” purchasing homes fell 13% from December but still remained high at approximately 4,000 units. The number of homes bought by people moving to a newer or better property declined by 17% from December.
However, the category of residential real estate investors saw stepped up purchases by 33% to about 3,240 units, the treasury said. They accounted for 30% of all purchases, the highest level since December 2010.
Close to a third of the speculative buying was done in just two areas – the Sharon, in particular the seaside town of Netanya, and the south, especially Beer Sheva. In Beer Sheva home purchases by investors jumped 73% from December to about 500 units, the treasury said.
One reason for the big jump in investor buying in Netanyahu is that foreign residents are classified as investors even if it is their only home in Israel. Nevertheless, it is unlikely that the increase in foreign buying was connected with the Paris terror attacks, which occurred on the 7th and 9th of the month.
Instead, foreign buying climbed in response to changing tax rules, real estate sources said. Under the 2014 Budget Arrangements Law the rate on homes worth up to 1.09 million shekels ($270,000) rose to 5% from 3.5% for the year ended January 15, 2015.
Buyers apparently waited to close a purchase until the rate declined, but were taken by surprise by a last-minute decision by the attorney general extending the higher rate until June 30. Many investors decided they could not wait that long and completed purchases in January anyhow.