Housing market in Israel shows strong signs of recovery

New construction in Israel credit: Shutterstock
New construction in Israel credit: Shutterstock

There were 8,053 deals in January 2024, the biggest number since September 2022, the Finance Ministry chief economist reports.

Pay 20% now and 80% later deals by housing developers and the feeling that the war is no longer threatening Israeli cities are having an effect on the housing market, which is showing signs of recovery. According to the Ministry of Finance chief economist, 8,053 homes were sold in January 2024 - the highest figure since September 2022 and 33% higher than average monthly home sales in 2023.

The chief economist's report says, "For the first time since March 2022, one month before the Bank of Israel began hiking the interest rate in the economy, a large rise in the number of deals compared with the previous month has been recorded. Compared with December 2023, there was a sharp rise of 32% in the number of deals."

The number of homes sold in January 2024 is especially surprising because it seems to contradict the economic situation and high interest rates, and of course the war. In all likelihood the fall in the number of rockets fired into the center of the country, the return to normality for many and the diminishing sense of war is very significant, and it is likely that a major proportion of the deals conducted in December were buyers that planned to purchase apartments, but put off completing the deal during the first months of the war.

There was also another reason for the rise in the number of deals. The chief economist wrote, "The analysis of contractors' actual cash flow, based on the contractors' VAT reports, compared with the potential flow resulting from the sale of new apartments (without taking into account the actual date of payment), suggests favorable financing conditions that the contractors offer to buyers, which explain, among other things, the increase in sales." The chief economist is referring to the 80-20 offers.

In such sales offers, buyers purchase apartments "on paper" usually as part of a "presale", and are required to pay 20% and sometimes even 10% of the price when signing the contract, and the balance when they take delivery of the project. All this, without linkage to inflation and construction inputs.

An analysis conducted by "Globes" in the past found that in this way the buyers save 10%-15% of the costs of buying an apartment, even though its nominal price remains the same, and this is due to not being linked to rising prices and being able to take out mortgages at a later stage, when interest rates may have fallen. Some might have the option of selling the apartment even before they take a mortgage, and reap a profit if housing prices rise.

Indeed, in January 2024, sales by contractors and developers totaled 3,716 apartments, including government-subsidized apartments - a 46% increase compared with January 2023 and the highest level of contractor sales since May 2022.

With the exception of Haifa and Northern Sharon (Hadera-Harish), all regions of the country saw a rise in the number of apartments sold by contractors and developers in January 2024. The Central Region led with a 62% rise in the number of homes sold in January 2024 compared with January 2023 and this was the highest number of homes sold in this region since May 2022.

Other outstanding areas were the coastal plain (including Rishon Lezion, Ashdod, Modi'in, Rehovot and Ness Ziona) and especially Ashdod, which had 33% of the sales in the region.

Jerusalem also stood out, although the highest rise in the level of sales was in the south with 51% more homes sold in January 2024 than in January 2023, with Netivot recording most sales.

Published by Globes, Israel business news - en.globes.co.il - on March 12, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.

New construction in Israel credit: Shutterstock
New construction in Israel credit: Shutterstock
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