Home Sales Show Israel's War on Property Investors Isn’t Over

Purchases by investors are down but so are sales, according to Finance Minstry figures

Jerusalem housing construction. A crane towers over a construction site in the capital.
Daniel Bar-On

Finance Minister Moshe Kahlon is still short of a victory in his war of attrition against property investors, figures from the Finance Ministry on the housing market released Monday showed.

The treasury’s chief economist said the number of home sales fell in October last year to its lowest since 2011 when social-justice protests briefly depressed the housing market. In November the number of sales doubled from October – a month filled with holidays that reduced the number of business days – but it was still 9% below the average for the first nine months of the year.

The reason for the decline in home sales during the two months was a sharp decline in purchases by property investors, the treasury said. The number of investor purchases fell to just 800, the lowest since records were first kept in 2002 and one of only three months in the last 15 years below 1,000.

The number shot up to 1,600 in November when the holiday period was over, but that was still 23% less than the average for the first nine months of 2016.

Kahlon has homed in on property investors as a factor in soaring home prices, and he has sought to deter them by a 60% increase in the property-purchase tax in 2015, and a new tax on people owning three or more residential properties that went into effect January 1.

Kahlon contends that investors are squeezing out people who are buying homes to live in for themselves and needlessly raising prices.

Prices are still rising

Still, there are few signs that the rise in home prices is letting up. In the 12 months ending in October, home prices increased by 8.7%, hastening from an 8.4% jump in the 12 months ending in September.

Moreover, as the treasury report found, the number of homes sold by investors fell to about 1,800 in November, 200 less than the average in the first nine months of the year.

Treasury chief economist Yoel Naveh offered some encouragement for Kahlon, noting that when investors sell it’s less likely than in the past that other investors will buy the homes.

In Jerusalem, for instance, where investor home sales plunged 41% in November, only 13% of the properties were bought by other investors, versus 25% in the previous nine months.

The result, as the treasury notes, is that fewer homes are available to rent: The stock of rental homes has been falling by about 200 a month in recent months, it found.

But if investors are selling, Kahlon’s target market isn’t buying. Young couples – the industry parlance for first-time home buyers – bought just 3,900 homes in November, unchanged from the January-September average but down 9% from a year earlier.

The Finance Ministry said that this may be because many first-time buyers are hoping to win the rights to an apartment in another Kahlon program, Machir L’Mishtaken, which passes on to home-buyers the discounts that the government offers contractors on land.

Meantime, however, the builders themselves have been suffering declining sales on homes they’re building as buyers hope to take advantage of the program. Only 2,300 new homes were sold in November, 21% under the average for the first nine months of the year.