Israeli Home Sales Drops in April-May, Signaling Slackening Demand

Sales down 7% on equivalent period in 2016, with number of homes bought as investments down 3%

An apartment for sale in Ramat Gan, near Tel Aviv.
Ofer Vaknin

Israel's Finance Ministry said Sunday that home sale numbers for April and May indicated slackening demand among homebuyers.

There were 17% fewer homes purchased by first-time home buyers this April compared to April 2016. Among buyers who were selling their existing home to buy a new one, the data for the month showed a 16% drop from last year.

In a country clamoring for a halt to the high cost of housing, the figures were seen as good news, particularly for Finance Minister Moshe Kahlon, who has made the issue a major policy platform.

Slackening demand could be a sign of a halt to increasing housing prices.

The slowdown was also reflected in the revenues of the country’s building contractors, which between March and May were at their lowest levels in 2.5 years – 3.5 billion shekels ($992 million) from the sale of new homes, compared to 5.3 billion shekels in May alone last year.

In April, only 6,500 homes – including both newly constructed and existing homes – were sold, while in May 8,500 were sold. The data reflect a 7% drop compared to the same two months last year.

Only 16% of home sales for the two months – a total of 2,400 homes – were by investors, compared to 19% last year.

Kahlon has been trying to devise measures, including legislation penalizing the owners of three or more homes, to discourage the purchase of real estate for investment so that these homes can be sold to individuals who will live in the properties.

The ministry’s chief economist, Yoel Naveh, noted that the share of investors among homebuyers in April and May would have been even lower – just 12% – if the significant number of foreign purchasers in Jerusalem and Netanya were excluded.

The decline in the percentage share that investors represent among overall homebuyers has also not been uniform.

In the same two months, Haifa and the north saw a 2% rise in the number of sales of homes originally bought for investment, while in Tel Aviv there was a 20% increase in homes sold by investors.

In other housing-related developments, at a meeting last week that Kahlon held with regulatory officials, the Bank of Israel’s banking supervisor, Hedva Ber, is understood to have complained about a number of private member’s bills introduced in the Knesset – including one by Kahlon’s Kulanu party colleague, Roy Folkman – that would require banks to allow the unemployed to defer their mortgage payments for three months.

Israeli Finance Minister Moshe Kahlon, April 19, 2017.
Ofer Vaknin

It would also exempt the unemployed from interest penalties for the three-month period.

Kahlon suggested that if the Bank of Israel were doing its job, there would be no need for private member's bills to address key issues within the purview of the central bank.

Kahlon is said to have turned to Israel Securities Authority Chairman Shmuel Hauser at the meeting and to have asked if there were any private member's bills related to his agency and was told that there were not.

Dorit Salinger, the Finance Ministry’s supervisor of capital markets and insurance, is said to have told Kahlon there were several private member's bills related to her department, but that negotiations were underway with the Knesset members over them.

Kahlon then turned to Ber and said: “Look at the other regulators. If you were doing your jobs, MKs wouldn’t be proposing private member's bills [regarding the Bank of Israel]. Check what you’re not doing right.”

Despite the fervent opposition by the Bank of Israel to Folkman’s bill, it has been given preliminary approval in the first of four votes in the Knesset, with the support of Kahlon and the cabinet.

The central bank is seeking to get Folkman to withdraw the bill, in exchange for another arrangement that would ease the situation of the unemployed in meeting mortgage payments, but Folkman is free to advance the legislation.

This was not the first confrontation between Kahlon and the central bank. At a conference of accountants in Eilat last Wednesday, the finance minister said it was in the interest of the Bank of Israel to keep housing prices high.

Kahlon also complained that home sales made through the government’s Mehir Lemishtaken program, which attempts to lower housing costs by providing land to developers at a discount, were not included in the Central Bureau of Statistics’ housing price index.

“There are a lot of entities that don’t want housing prices to fall,” the finance minister said. “If you have an apartment worth 3 million shekels, would you want it to fall to 2.5 million?”

The Bank of Israel declined comment for this article.