Investors who buy large numbers of apartments are leaving Israel's real estate market, according to the August 2024 survey by the Ministry of Finance chief economist. The survey found that while until recently these big investors completed most of the deals by investors, in August they comprised 33% of all investors who bought apartments.
The chief economist found, as did the Central Bureau of Statstics in its latest review, that in August there was a significant fall of 16% in the number of deals, compared with previous months. According to the chief economist, in August 7,514 apartments were purchased, of which 6,811 were on the free market and the balance in government subsidized programs; 60% of purchases were by young couples, 24% by buyers moving up the housing ladder, and 16% by investors.
The chief economist found that Tisha B'av, which this year fell on August 13 (last year it fell in July), contributed to a reduction in the number of deals, since some of the public tend not to sign contracts in the days prior to the fast.
The chief economist found that over the past year some 1,200 apartments have been bought by investors although this is half the number that was bought in an average month in 2021.
An interesting finding within this indicates a significant change in the mix of real estate investors and a fall in the proportion of "heavy" investors who own at least one apartment for investment, including "apartment collectors" (owners of three or more apartments). Over the year prior to April 2024, the proportion of "heavy" investors was 62%-72%-67% of the total number of investment apartment buyers, while since May 2024, this proportion has been falling and was just 35% in August. The proportion of those with three or more apartments fell from 36%-42% in 2023 and the first four months of 2024, to just 17% in August.
There are several possible explanations for this. The first is that "heavy" investors are looking for alternative investments these days, due to the uncertainty in Israel's economy. A second explanation is talk in recent months on purchase tax changes - possibly raising it to increase state revenue, or lowering it to encourage more deals and thus also increase state revenues.
Another explanation is a fall in the number of purchases 'buy now pay later' deals by investors of homes still under construction because there are less offers by developers. A final possibility is that "heavy" investors do not believe that apartment prices will continue to rise at the current rate, while the war is hurting the economy so badly, and rental prices are rising, but not at a rate that makes the purchase of apartments more worthwhile for them.
Published by Globes, Israel business news - en.globes.co.il - on October 13, 2024.
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