Home Sales in Israel Fell Sharply in February, Treasury Says

Figures provided further evidence that Israel's overheated residential real estate market is finally cooling

David Bachar

Further signs of a cooling Israeli housing market emerged on Sunday, with the Finance Ministry reporting a sharp drop in home purchases in February, with first-time buyers and investors showing the biggest declines.

The treasury’s chief economist said the number of home sales dropped 9 percent from January and 7 percent from a year earlier to about 8,800 units. Sales of new homes fell even more sharply, down 16% from January and from February 2016 to 1,900 units.

“Not counting the Machir L’Mishtaken program, sales of contractors in February were less than 1,800 units. Not counting last October, in which there was an especially low number of sales because of among other things the High Holidays, this is the lowest total for new homes since August 2014 when sales were depressed by the zero-VAT plan,” the treasury said.

The figures are mostly good news for Finance Minister Moshe Kahlon, who has given top priority to reining in home prices. Among his programs is Machir L’Mishtaken, which sells government land to contractors at a discount they are required to pass on to home buyers.

Last month the Bank of Israel reported that the value of new mortgages approved fell 16% year on year in February to 4.12 billion shekels ($1.12 billion). Earlier this month the Central Bureau of Statistics’ housing price index showed that home prices were unchanged from October through February.

Kahlon has also sought to ease demand pressure on the housing market by discouraging investors from buying homes by imposing taxes on them. The treasury figures showed that his plan was having an impact as the number of home purchases by investors fell to just 16 percent of the total for February, its lowest since July 2015.

In fact, the figures showed that in the segment for new homes, investors were net sellers – selling 2,300 homes in February while buying just 1,500. That marked the second month that investors sold 800 or more homes than they bought.

However, the news wasn’t all good for Kahlon because his target segment for home buyers – first-time buyers, popularly known as “young couples” – also fell. However, the treasury attributed a lot of the decline to buyers waiting to win a place in the Machir L’Mishtaken program, which awards the right to buy a home by lottery.