Investors drawn to Israeli housing by more than tax cut

Apartments in Yehud  / Photo: Eyal Izhar, Globes

For the first time since 2016, more investors are buying than selling Israeli homes, and not only because of lower purchase tax.

Israel's real estate market has moved up a gear. The number of deals by investors buying housing between August 2020 and January 2021 jumped 70% compared with the same period in 2019-2020. For the first time in five years, there were more homes bought by investors than sold.

The reason for the big fall in investment in buying housing between 2016 and 2020 was the policy of former Minister of Finance Moshe Kahlon, who raised purchase tax on homes for investment and threatened other measures such as a third home tax, which was struck down by the High Court of Justice. Nevertheless, Kahlon was successful in reducing investor activity in the market, which fell from 23%-25% of the entire market to below 15%.

From April 2016, there were more investors selling homes in Israel than buying them. Investors in Israel switched to other options including overseas real estate. In 2016, 2,800 more homes for investment were sold than bought. The number rose to 5,800 in 2017 and peaked at 7,000 in 2018. In 2019 the number fell to 6,500 and to 4,800 in 2020. In the closing months of 2020 and January 2021, there was a balance with the same number of homes for investment being bought and sold, and it is safe to assume that hereon the balance has swung in favor of more homes for investment being purchased.

In the past few months, about 2,000 homes on average per month have been bought for investment, back to the pre-Kahlon levels in early 2016. Home purchases for investment are now back above 20% of the entire market, also for the first time since the start of 2016.

The trigger for the return of investors into Israel's real estate market was the decision by Minister of Finance Israel Katz at the end of July to cut purchase tax on buying more than one home.

But experts believe that the flow of investors back into Israel's real estate market is more complicated than just the cut in purchase tax for investors from 8% to 5%. Experienced investors stayed in the market anyway and saw that they could make a profit despite the higher tax, while many who invested abroad were burnt. Offices, which became an attractive investment from 2016, are now out of favor with residential property seen as a better bet. People also see a shortage of housing and prices rising more quickly, making housing a good investment.

The bottom line is that Israel's housing market in 2021seems full of promise and opportunities - a sure fire draw for even more investors.

Published by Globes, Israel business news - en.globes.co.il - on March 31, 2021

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

Apartments in Yehud  / Photo: Eyal Izhar, Globes
Apartments in Yehud / Photo: Eyal Izhar, Globes
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