Sales of New Homes in Israel Fall 8.3% in First Nine Months of 2016

Still, sales are high, and will probably make this year second only to last year, newly-released data shows.

Finance Minister Moshe Kahlon, March 30, 2016.
Ofer Vaknin

This year looks like being a more tepid one when it comes to new home sales, after 2015 broke all records. For the first nine months ending on September 30, the number of transactions for new residential construction declined by 8.3% compared to the same period last year.

Nevertheless, that still leaves the pace of sales very high, and will probably make this year second only to last year, data released yesterday by the Central Bureau of Statistics show.

The numbers also reflect major volatility on a month-by-month basis in new home sales, but the general trend seems to be in a downward direction.

All of this is important to members of the public looking to buy a newly built home. The figures will also be of interest to Finance Minister Moshe Kahlon, whose Kulanu party ran on an election platform that made reducing Israel’s high housing costs a top priority. The accepted wisdom has been that home construction has not kept pace with demand. The data released yesterday seem to be an indication of reduced demand, at least for new construction.

The new data square with separate Finance Ministry figures showing a steep decline in the number of housing units being purchased for investment purposes. Generally, buyers of new homes for investment have represented around 25% of all buyers – and have even spiked at over 30%. But since July 2015 the figure has fallen below 20%, following the imposition of a stiff purchase tax on residential investment property. That is music to the ears of Kahlon, who has tried to encourage investors to leave the residential real estate market, in the hope that it would reduce demand and free up homes for buyers who plan to live in their properties.

In the third quarter of this year, 7,146 housing units were sold – a 15% drop compared to the same quarter last year. That also represents a 3.6% drop from the second quarter. The drop might be in anticipation of a bill that Kahlon is touting, which would impose a special tax on owners of three or more homes – a legislative effort also designed to help lower housing prices. The bill was particularly in the public eye in September, which may account for the low number of new home sales that month, just 2,192.

In the first nine months of the year, Jerusalem had the most sales of new homes: 1,240, followed by Ramat Gan at 1,174, Netanya at 1,139 and Tel Aviv at 1,075.