The proportion of total housing purchases in Israel accounted for by investors fell to only 13% in July 2018. The downtrend in sales of new homes by contractors continued and the stock of housing units held by investors fell by 700 in July, according to a housing market survey published today by the Ministry of Finance's chief economist.
At the same time, the survey shows that it is taking longer for move-up buyers to sell the homes they have. According to the Ministry of Finance's figures, it appears that these homes are eventually being sold at lower prices. Since move-up buyers account for a significant proportion of the market, this figure might indicate a drop in housing prices, but the Ministry of Finance expresses the reservation that the figures are not complete.
The survey reports that 8,500 housing units were sold in July, 766 of which were in the framework of the Buyer Fixed Price Plan. The number of deals dipped 1% in comparison with July 2017. At the same time, the Ministry of Finance points out that the number of deal in July 2017 was low. The number of purchases in July was 4% more than in June 2018, mainly as a result of a rise in the number of Buyer Fixed Price Plan deals. The number of deals at the market price (excluding the Buyer Fixed Price Plan) was 5% fewer than in July 2017, reaching the lowest level in July for the past decade.
The survey reports that contractors sold 2,500 new homes in July, 2% more than in July 2017, which the Ministry of Finance attributes entirely to the Buyer Fixed Price Plan subsidized homes market segment. Excluding these deals, the number of new homes sold by contractors was down 12%.
"Since October 2016, the number of deals for new homes at market prices has fallen continuously (each month in comparison with the preceding month) at a rate in excess of 10%, except for May and June 2017, when the decreases were 1% and 9%, respectively," the survey states.
Proportion of investors down to 13%
According to the survey, the dearth of housing purchases by investors is continuing, with only 1,100 housing units being purchased in this segment in July, similar to the preceding month and 29% fewer than in July 2017. Investors' purchases in July this year accounted for just 13% of total housing purchases, 5% less than in July 2017.
"In the breakdown by district, Jerusalem stood out with a sharper drop in activity by investors," the survey states. "The total number of housing units purchased in this district in July was a mere 95, down 47% in comparison with July 2017 and only one tenth of all the housing units purchased in this district in July. For the sake of comparison, in July 2017, investors accounted for 20% of all the housing units purchased in this district."
At the same time, sales of housing units by investors totaled 1,800 in July, down 4%, compared with July 2017. The July figures reflect a leveling off in the downtrend in sales by investors, after sales by investors dropped by over 10% a month since November 2017 (except for May, when the decrease was 7%). Sales by investors in July were 6% more than in June 2018.
766 discounted homes sold in July
4,200 homes were purchased by non-homeowners in July, 3,500 of which were sold at market prices (excluding those sold in the Buyer Fixed Price Plan framework). The number of homes purchased by non-homeowners at market prices did not change in comparison with either July 2017 or June 2018, while stepped up purchases of Buyer Fixed Price Plan homes pushed up the total number of homes purchased by non-homeowners by 6% in July when these deals were included. The figures show that 766 homes were purchased in the Buyer Fixed Price Plan framework in July 2018, 54% more than in July 2017 and 43% more than in June 2018.
Move-up buyers having trouble selling their current homes
Home purchases by move-up buyers totaled 3,200 in July, 5% more than in July 2017. At the same time, the Ministry of Finance notes that the number of homes purchased by move-up buyers was particularly low in July 2017 (21% fewer than in July 2016 and 14% fewer than in June 2017), meaning that the number in July 2018 was still low in this segment. "The low level of purchases by move-up buyers is due, among other things, to the difficulty they are having in selling their previous homes, particularly in view of the tendency among investors to leave the market, while at the same time, young couples are looking for cheaper options in the Buyer Fixed Price plan," the review states. "While it took an average of 10 months for move-up buyers to sell their old homes in January, the length of time needed grew to 13 months in July."
The Ministry of Finance also examines the prices of the homes sold by move-up buyers. The survey finds that the longer a home is on the market, the lower the price at which it is eventually sold.
At the same time, the Ministry of Finance qualifies this finding, saying, "Since we lack data about the quality of the homes, it is difficult to determine the reason why these homes are being sold at lower prices. It cannot be ruled out, however, that the shorter time remaining for taking advantage of the tax benefit is forcing move-up buyers to compromise more on the price."
Published by Globes [online], Israel business news - www.globes-online.com - on September 17, 2018
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