Investment buyers flood Haifa housing market

Haifa  credit: Eyal Izhar

Transactions numbers reached a peak in Haifa in the last quarter of 2020, leaving expensive Tel Aviv trailing.

The Haifa district is at a peak for the number of residential real estate deals in it, while Tel Aviv, once Israel's real estate capital, is at one of its lowest ebbs in twenty years, according to the real estate survey by the chief economist at the Ministry of Finance for the last quarter of 2020.

Israel's residential real estate market as a whole is booming. 32.4 thousand homes were sold in the first quarter, 28.7 thousand of them on the open market and the rest under the "Buyer Price" program. The number of deals on the open market represents a rise of 29% in comparison with the fourth quarter of 2019, and is the second highest quarterly figure at least since 2002.

The Tel Aviv district saw growth of just 6% in the number of open market deals in comparison with the fourth quarter of 2019. There were 2,300 transactions in the district in the final quarter of 2020. The Haifa district, on the other hand, saw one of its busiest quarters in the last twenty years, with 5,100 transactions in the final quarter of 2020.

Tel Aviv and Haifa represent extremes in the Israeli housing market. In the first, prices are rising steeply, but the number of transactions is declining, while in the second prices are declining and the number of transactions is rising. This should not be read as a sign that Haifa is suddenly flourishing; the cause is mainly a rise in demand by investment buyers.

According to the chief economist, analysis of these two markets since 2002 shows that the number of quarterly transactions was roughly the same in both. During this period, the real estate market hit a severe crisis and prices fell. The Tel Aviv market, however, recovered from the crisis in the middle of the first decade, whereas the Haifa market was hit by the Second Lebanese War, and price declines continued until the end of the decade.

A wide price gap opened up between the two cities, which brought investment prices to Haifa in large numbers, boosting transaction numbers, while in expensive Tel Aviv transaction numbers were stable until 2015 and have declined since then.

On the other hand, the chief economist sees the Haifa district as one of the main gainers from the Bank of Israel's low interest rate, "which led to sharp growth in investment purchases, especially in areas with low housing prices. In 2020, the number of open market transactions in the Haifa district was almost double the number in the Tel Aviv district." Prices in Haifa nevertheless lag behind other areas of the country.

Investment activity on the rise

Investors not only flooded Haifa but returned in force to the market as a whole. Investor activity is up 77% in comparison with the fourth quarter of 2019, thanks to the reduction in purchase tax rates on second and more homes last July. At the same time, investors sold about 6,000 homes in the last quarter of 2020, making an average gain of NIS 358,000.

Some 700 of the homes sold yielded losses. The largest losses were in the Southern district, particularly in Beersheva. The reason for that is apparently the flooding of the district with "Buyer Price" apartments, providing young couples with a cheaper alternative for buying a home.

From the point of view of state revenues, the purchase tax cut in July has proved itself: revenues from the tax rose 16% to NIS 570 million in the final quarter of 2020.

Published by Globes, Israel business news - en.globes.co.il - on April 12, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Haifa  credit: Eyal Izhar
Haifa credit: Eyal Izhar
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