Record Israeli Home Sales in June – 40% to Investors

Peak in property deals was spurred by June 24 introduction of purchase tax.

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June home sales were at an all-time record, as was the proportion of the homes sold to investors rather than home-buyers planning on living in their new premises, the Chief Economist’s office at the Finance Ministry reported Sunday.

The jump in sales is being attributed in part to buyers who were trying to beat the hike in the purchase tax that went into effect on June 24. A total of 16,100 homes were purchased in June, 40% of which went to investors.

The sales figures come at a time when the high cost of housing remains a major issue on the public agenda. The Chief Economist’s data relate only to sales volume and not to the prices at which the homes were sold.

June’s residential sales volume was 42% higher than in May, even though the planned increase in the purchase tax was already a matter of public knowledge then. June’s sales pace broke a prior record from December of 2013, when investors rushed to snap up properties prior to the repeal of an exemption from betterment tax on owners of a second home.

The chairman of the Real Estate Appraisers Association, Ohad Danus, wryly called the jump in sales in June retaliation for what he said was the rash imposition of the purchase tax that went into effect on June 24.

“What is more interesting is not the fact that the investors moved up their purchases, but rather their expression of a complete lack of confidence in the ability of the steps taken by the government to bring about a drop in prices. Otherwise, if prices were [expected] to drop, why would they be concerned about an increase in the purchase tax? For the meantime, the wild [pace of] purchases is fueling the market,” he said. “The situation in the housing market is tough, very tough.”

However, preliminary figures for July indicate that home sales plummeted, with a particularly low proportion going to investors in residential property rather than owner occupants.

The increase in home sales in June to young couples – who have been a major focus of attention in recent years as homes in the center of the country have increasingly been priced beyond their reach – was a modest 4% compared to May.

When it comes to June sales to homeowners who traded up to better homes with the intention of living in them themselves, however, the month saw a 30% jump over May to levels not seen since May 2010, when such data was first collated.

New residential construction led the surge in June sales, with a 54% increase over May. Sales of second-hand homes were up by 38% for the month. An all-time record of 4,500 new homes were also sold in June.

Treasury officials attributed the disparity between new and second-hand sales to the higher involvement of investors in the purchase of new construction. About 6,400 of the homes sold in June were snapped up by investors. June sales were so high, Finance Ministry staff said, that they equal the average quarterly sales pace since 2007.

The June sales frenzy was particularly pronounced in Tel Aviv, where apartments tend to be more expensive and therefore the savings on a purchase prior to the June 24 purchase tax would be that much greater. Sixty percent of June sales in the Tel Aviv area – nearly 1,000 housing units – went to investors, a 120% increase in sales to investors in the region compared to May.

In Netanya there were twice the number of sales to investors compared to May. Notably, the profile of the average residential real-estate investor in the Netanya area shifted between January and June, with the proportion of retirees doubling during the first half of this year to 9.5% of all investors.