Investors returning to Israel's housing market

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

A survey by the Ministry of Finance chief economist found that investors are buying more homes than at any time since the purchase tax was raised in 2021.

There were the highest number of housing purchases by investors in May 2024 since purchase tax was raised for multiple home owners (two or more homes). Also for the first time since 2022 more investors are buying homes than selling them, according to the survey on housing real estate activity in May by the Ministry of Finance chief economist. The survey also reveals a wave of housing purchases in southern Israel.

The number of housing real estate deals in the first five months of 2024 was 28% higher than in the corresponding period of 2023. This is a statistic that could not have been taken for granted considering that this was during a war.

At the same time, housing prices are rising substantially. In the first five months of the year, apartment prices rose 4%, which suggests that the annual rate of increase could be a double-digit percentage.

Following the positive monthly data, some real estate sources have recently begun to talk about a boom in the industry, but the chief economist's data show that the situation is different. But according to the review, this is not yet the case. 7,800 apartments were sold per month, which is 15% lower than the multi-year monthly average. So while 2024 is better than 2023, it is still far from being a good year.

Another important finding from the chief economist's survey is from the Negev region. In the country as a whole, sales of new apartments in May 2024 by contractors jumped by 60% compared with May 2023, with the total number of deals including second hand apartments rising by about 28%. In May 2024, 532 new apartments were sold in the Negev on the free market, up 85% compared with May 2023, and one of the highest levels since 2000. The economist's analysis shows that 57% of the buyers did not live in the south, so it is likely that many of them are investors.

A double record for investors

The main finding by the chief economist in the survey for May was a double record for investors. Firstly, 1,297 homes were sold - the highest figure since November 2021. Although from an historical perspective this is not a high number, and in the past far higher numbers have been recorded, in most instances the higher numbers were during periods when purchase tax for investors was lower and there were bigger incentives for investors.

The second record is even more interesting. Investors bought more apartments in May 2024 than they sold. For the first time since the end of 2021 the balance of investment in housing is positive. In numerical terms, in May investors sold only 997 apartments, while buying 1,297 for a positive balance of 300.

This positive balance has been rare in recent years, with investors more preoccupied with selling their housing inventory, due to the declining economic viability of the industry. Purchase tax on multiple home ownership (two or more homes), jumped by 60% in November 2021, offsetting a large part of the returns, and in addition, higher interest rates offered investors much better alternatives, especially because of falling returns of 2%-2.5%in most cities from housing, due to the increase in apartment prices.

However, in recent months, despite the war, a significant change in this direction has been evident. If in the first three quarters of 2023, investors sold 340 more apartments than they bought, in recent months the gap narrowed to zero, and in May it climbed into positive territory for the first time since November 2021.

Published by Globes, Israel business news - - on July 11, 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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