The real estate market took a downturn in the Jerusalem and Tel Aviv areas, while purchases of apartments surged in northern Israel and the market in luxury apartments for investors took a downturn. These trends were featured in the August real estate survey published today by Minister of Finance chief economist Yoel Naveh.
Purchases of first apartments dipped by a moderate 4% in August. In a breakdown by areas, Jerusalem stood out with a 14% drop in these purchases, following a similar decrease in July. At the same time, the prices of apartments purchased by young couples in this area slid by an average of 10%. Noteworthy is that fact that the period involved preceded the recent wave of terrorist attacks, many of which took place in the Jerusalem area. Naveh believes that the drop in prices resulted from a rise in the proportion of deals in this region involving housing in communities with relatively low prices. The fall in purchases by young couples in the Jerusalem area was partly offset by a steep rise in purchases in this market segment in the northern outlying districts.
A geographic analysis of the number of deals showed clear differences between different regions in Israel. Together with a relatively modest 11% fall in the number of deals in the Tel Aviv district (this district led the drop in deal in July), sharp increases were posted in the northern outlying district. In general, when the rate of change in the number of deals in August is examined, it emerges that this rate is picking up steam in places with lower prices. These findings are valid for both apartments for investment and purchasers of first apartments.
In Naveh's opinion, increasing the tax burden on investors by raising the purchase tax to 8% in July led to a steep drop in the proportion of new apartments by purchased by investors in general, and in the proportion of luxury apartments among the new apartments purchased in particular. For example, while new apartments accounted for 35% of all apartments purchased by investors during the first five months of the year, this proportion fell to 20% in August. The proportion of apartments purchased for residential purposes went up 0.6% during this period, but this increase only partly compensated for the steep drop in purchases of new apartments by investors.
Beyond the decrease in the frequency of deals in areas with relatively high prices, the investors segment of the market also featured a fall in the price levels of the apartments at the level of the district itself. For example, the average price of an apartment purchased for investment in the Sharon district was down 13%, compared with the average price of an apartment purchased for investment in this district in the early months of the year.
Naveh noted that the Sharon district, formerly among the most dominant areas in investment activity since mid-2014, led the drop in purchases by investors in August (16%), a particularly prominent decrease, given the 3% rise in purchases of first apartments in this district.
According to Naveh, the Sharon district is the only one in which the proportion of purchases by investors continued to decline, following July's sharp downturn. From almost half of all deals in June and a third of all deals over the 12 preceding months, the proportion of apartment purchases for investment fell to only 16% in August. An analysis of the characteristics of the investors in this district in August shows a strong rise in the proportion of pensioners (17%), compared with 5% in early 2015.
Published by Globes [online], Israel business news - www.globes-online.com - on November 1, 2015
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