Investors Flee Israeli Housing Market Before Planned Tax

Treasury figures show 14% drop in home purchases for investment.

Apartment buildings under construction in Netanya (archives).
Ofer Vaknin

Long before the Knesset has approved the plan, Finance Minister Moshe Kahlon’s tax on people who own three or more homes is already causing property investors to sell, according to treasury figures released on Sunday.

Treasury Chief Economist Yoel Naveh said in a report that the number of homes bought by investors was down 14% in August from the previous month. They made up only 17% of all home buyers, the lowest percentage since July 2015.

“It’s likely that one of the factors contributing to the sharp decline in investment buying in August was publication of the law imposing taxes on investors owning at least three homes,” Naveh said.

The plan for the controversial tax was introduced by Kahlon this summer, in the hope of easing pressure on the housing market created by investor buying and to help rein in skyrocketing prices. Critics have said it is unlikely to work, because investors will pass on the cost to renters or evade the tax.

But so far, not only has investment in residential properties declined, the number of investors selling has grown – averaging 2,000 sales in both July and August. As a result, the number of investor-owned homes fell by 400 in August, after an average increase of 600 units a month over the previous five years.

Still, there is no sign that the falling stock has pushed rents higher.

The Finance Ministry said the number of homes bought by all classes of buyers dropped 2% in August from July. It was down 11% from March, which had seen the most purchases in the past year. Nevertheless, with 9,500 sales, Israelis are still suffering home-buying fever, purchasing 117,000 homes in the 12 months to August.