The announcement of Minister of Finance Yair Lapid's zero VAT plan and the Passover holiday paralyzed the real estate market in April 2014. Demand for homes and sales plummeted and the supply rose. The Central Bureau of Statistics reports that new home sales were down 9% in April compared with March and 19% compared with February. 1,606 new homes were sold in April, the lowest number since September 2012.
544 new homes were sold in the Central District in April, down 11% from March, and 252 new homes were sold in the Tel Aviv District, down 37%.
Real estate industry sources had expected that the announcement of the zero VAT plan would greatly reduce new home sales. Given that home sales in April are usually low, because of the Passover holiday, it seems that the effect of the zero VAT plan has not hit the market as expected, even with the sharp drop in home sales in March-April.
Demand for homes totaled 2,788 homes in April, 2% lower than in March and 14.4% lower than in February. The housing supply totaled 24,606 homes in April, 1.1% more than in March.
Since Lapid announced the zero VAT plan in mid-March, many real estate industry sources have said that housing market has frozen, because the promised tax breaks on new homes have caused potential homebuyers of first apartments to wait to see who will be eligible for it. Contractors and agents confirm that, since the announcement, traffic at sales offices has plummeted.
While it is possible that the April figures do not yet reflect the effect of the zero VAT plan, it is also possible that potentially homebuyers eligible for the tax break is much less than estimated.
Published by Globes [online], Israel business news - www.globes-online.com - on May 28, 2014
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