A review published today by the Ministry of Finance Chief Economist indicates that the number of residential real estate transactions continued dropping in August 2016, as did the volume of investor activity. According to the data, the sale of apartments by investors has significantly increased, some of the sellers owned several apartments for investment, and the seller might have already been influenced by the bill to tax three apartments and up.
The review states that in August, 9,500 apartments were purchased in Israel, 2% down from July. Transactions that were part of government programs, Target Price and Buyer Fixed Price, moderated the decline. When these projects (in Kiryat Motzkin and Rosh Ha'ayin) are subtracted, the drop in August was double, totaling 4%. If we compare the figure to the corresponding month in 2015, the number of transactions increased by 10%, but a relatively low number of transactions were registered in August 2015, after the purchase tax increase for investors came into effect in June 2015.
The drop in the number of transactions in August was spearheaded by investors, with a 14% decline from July. The share of investors in overall transactions dropped to 17%, the lowest figure since July 2015, immediately after the purchase tax rise. According to the review, the drop in the percentage of investors was seen on the national level, with a particularly striking 31% drop in central Israel, specifically in the purchase of new homes. A significant drop in transactions made by investors was also noted in in Beersheva, with 18%, and Haifa, with a 16% decline.
According to the Ministry of Finance's review, "It is possible that one of the factors contributing to the sharp drop in purchases made by investors in August is the publication of the bill to impose more tax on investors owning three apartments and up. Partial figures for September are indicative of a notable drop in this parameter on the national level as well."
Furthermore, the number of sales made by investors continues rising. Overall, investors sold 2,000 homes in August, similarly to July, 25% more than the corresponding month last year. "Another noteworthy figure regarding sales made by investors owning multiple properties was the fact the prices of apartments sold by these investors were high, compared with previous months. This might be explained, among other things, by taxation considerations. Data for the Greater Tel Aviv area was particularly remarkable; the average price of a home sold by a 'heavy' investor in August was NIS 1.76 million, 23% higher than the average price of property in this area sold by a similar investor last month." According to the Minister of Finance's interpretation, investors chose to sell more expensive apartments, for which a higher tax will be imposed in the future.
Another striking figure in this review regards the income levels of buyers of reduced-price apartments in the Kiryat Motzkin fixed buyer's price project. "The average salary per household of Mehir Lamishtaken apartment buyers was NIS 16,000 and the median salary was NIS 13,800. The primary explanation for the relatively high pay levels of households in this project (compared with the average salary per household in the overall population) is the high level of employment among both spouses," the Ministry of Finance claims.
Ministry of Finance analysis of salary levels in other fixed buyer's price projects in Afula and Lod yielded similar results. Alongside the ministry's explanation regarding the reasons for this figure, it is possible that it is also motivated by higher awareness of this government program. That is, particular population sectors may have been exposed to the program to a greater extent, particularly considering the lack of an extensive publicity campaign.
Published by Globes [online], Israel business news - www.globes-online.com - on October 30, 2016
© Copyright of Globes Publisher Itonut (1983) Ltd. 2016