Are housing prices about to change direction? The Ministry of Finance today published figures for new and secondhand housing sales in October. The figures were not unusual, especially for a month in which the Sukkot holiday took place. At the end of the review, however, the report gives a glance at the real estate market in November - where there is some real drama.
"Initial figures for November indicate a sharp rise in the number of deals. This is particularly prominent in the secondhand housing sector," the review states. "The proportion of increase in secondhand housing purchases is significantly greater than for new housing, which can be explained, among other things, by sales of housing from a waiting housing inventory and/or stronger housing sales by investors."
If indeed real estate investors are "throwing" merchandise on the market, it could be a sign of a change in the price trend, because it would mean that not only are investors buying far fewer apartments in recent months, but they are now apparently selling them. Beyond the fact that this is increasing the supply of housing in the market, it is possible that the investors' decisions stem from expectations of a fall in prices, leading them to act now when prices are at a peak.
October in the real estate market: More deals
7,700 residential housing units were purchased in Israel in October, according to a review by the Ministry of Finance chief economist. This is 18% more than the low point reached in September, but the main reason for this is that fact that the High Holy days this year took place in September.
The October figure was 14% more than in October last year, a moderate rise, considering that the holidays last year fell in October. Furthermore, the level of activity in the market during that period last year was still affected by waiting for the 0% VAT plan. The average number of deals in September-October this year was the lowest for these two months since September-October 2011, a period that was affected by the social protest.
Initial figures for November indicate a steep rise in the number of deals that was especially prominent in the secondhand housing segment.
At the same time, the Ministry of Finance chief economist pointed to a drop in deals in areas in which the buyer fixed price tenders were conducted. It was found that young couples were waiting for the buyer fixed price tenders, which are offering housing units at NIS 100,000-200,000 less than the market price, and are therefore not buying housing in these areas.
In general, purchases by young couples were up 16%, compared with the preceding month, but this level is still 33% less than the June peak. An analysis of geographic areas shows high variance in the rate of change. While these purchases were down 2% in the central district and up by a moderate 5%-7% in the Haifa, Jerusalem, and Hadera districts, purchases by young couples in the northern outlying areas jumped (increases of 50%-90% in Tiberias and Nazareth).
The proportion of investors in total deals in October was 19%, the same as in the preceding month, and 9% less than in October 2014. It should be noted that when purchases by foreign residents are excluded (these purchases are classed as an "additional apartment," even if the purchased housing is the only housing owned by the foreign resident in Israel), the proportion of investors was only 17%.
Purchases by those moving into better housing rose 19% in October , after the low point reached in this segment of the market in September (the lowest since September 2013). Nevertheless, this level is still 40% less than the peak reached in June 2015. It should be noted that the proportion of people moving into better housing who were buying a "waiting apartment" has been falling since the beginning of 2015. At the same time, the inventory of housing in waiting fell for the first time since 2011.
An analysis of the prices of the housing purchased by foreign residents in October shows that only the Netanya area were they "competing" for the same housing units purchased by young couples and/or people moving into better housing.
Separating purchases of new and secondhand housing showed similar results. At the same time, the variance in rates of change between geographic areas was greater for new housing than for secondhand housing.
Published by Globes [online], Israel business news - www.globes-online.com - on December 27, 2015
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