Finance Minister Moshe Kahlon has succeeded in driving investors out of the residential real estate market, but his flagship program for making homes accessible to first-time buyers isn’t making much of an impact, a report released on Wednesday by the treasury’s chief economist showed.
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The report said home sales fell 12% year-on-year in the second quarter to about 24,100 units. The sharpest declines were in Jerusalem and Tel Aviv, which recorded “historic lows.”
Excluding homes sold through the Mahir Lemishtaken (“buyer’s price”) program, only 22,700 units were sold: the smallest number since the third quarter of 2014, when then-Finance Minster Yair Lapid caused home sales to drop with a plan to exempt many buyers from VAT. The plan never won Knesset approval and sales quickly rebounded.
Kahlon has made curbing home prices a top priority, with limited success: Last week the Central Bureau of Statistics said housing prices climbed 4.5% in the 12 months through mid-June, a slower pace than in previous years but still high.
Kahlon has sought to cool the market by discouraging the purchase of homes for investment, through higher taxes and Mahir Lemishtaken, in which the government sells land at a discount to developers who commit to passing on the savings to buyers.
But the treasury data showed that just only 1,400 of the some 11,000 homes bought in the second quarter by first-time buyers — often termed “young couples” — were purchased through the program, even though they are its target group. Sales of new homes to young couples, excluding Mahir Lemishtaken sales, fell 12% year-on-year and quarter-on-quarter, the treasury said.
Kahlon’s offensive against property investors, whom he has accused of squeezing out prospective owner-occupants — seemed to be working. Investors bought around 4,200 homes in the second quarter, accounting for just 17% of all properties bought. That was the lowest share in a decade.
On the other hand, sales of homes by investors fell 9% year-on-year. The declines were steepest in areas with the highest demand.
The result of the slowing activity by investors is that the number of homes available for rent declined by 7,000 in the five quarters through June 30, the Finance Ministry said. In the five quarters before that, the stock of rental housing had risen 10,000, helping to soak up some of the demand for homes.
The biggest drop of all was in the category of new homes, where sales were down in the second quarter by 28% from a year earlier. Not counting sales through Mahir Lemishtaken, new-home sales fell 38% to just 5,100, the lowest ion three years, the treasury said.
“The continuing decline in builders’ cash flow may be an incentive for them to sell homes quickly even if prices are falling, in order to service their debt and in order to free cash for marketing new projects,” the chief economist said.
The one exception to the slowing home market was the Haifa area, which has lagged much of the rest of the country throughout the housing boom of recent years. Home sales rose more than 78% to 4,316 units in the quarter from the same time in 2016, making it the top sales region for the first time since 2011. A building boom in the Haifa suburb of Kiryat Motzkin accounted for the growth.