Treasury claims home price expectations changing

Sample apartment, photo: Ministry of Construction

Only 19% of transactions in July were made by investors, while new apartment purchases dropped 11%.

Today, the Ministry of Finance chief economist published an economic survey, the first part of which focuses on residential real estate transactions in July 2016.

According to the chief economist's data, 9,900 homes were bought in July, representing a 4% decline from June, after two months in which the number of purchases rose. This is an 11% rise from July 2015, but the volume of transactions in July last year was relatively low, since buyers made their purchases earlier, in June, before the purchase tax rise.

The decline in transaction volumes was mainly in new apartment purchases, with an 11% drop, while second hand apartment purchases did not significantly change compared with June. The most significant declines in July were in purchases made by first-time home buyers and real estate investors, which decreased 8% and 6%, respectively, while the number of purchases made by move-up home buyers did not significantly change in comparison with the previous month.

The sharpest drop in purchases made by young couples was in new apartment purchases, which plummeted 23%, compared with June. This figure was affected by the lack of Buyer's Fixed Price (Mehir Lamishtaken) program deals in July, but even if we deduct the number of apartment purchases under the buyer's fixed-price program in Rosh Haayin in June, there was still an 8% decline in the number of new apartments young couples bought in July, which followed the 13% drop in the second quarter (compared with the first quarter).

The proportion of transactions made by real estate investors continued dropping in July, to 19%. The area with the sharpest decline in July was Netanya, with a 34% drop to only 190 apartments bought by investors. Only in outlying areas in northern Israel was the number of apartments bought for investment lower.

In the past 18 months, the Netanya area has seen the highest growth in sales of apartments by investors. The sharp fall in purchases made by investors in this area in July was particularly noteworthy in the new apartment sector, contributing to an overall 22% drop in sales made by building contractors in this area.

The number of apartments sold by investors in July was 2,000, a 7% decline from June, after June saw sales up by 17%. This is still a high volume of sales, 50% higher than the average in 2010-4. The volume of sales is also higher than the volume of purchases made by investors in July, continuing the trend that has emerged since the beginning of the year of a decrease in the number of apartments owned by investors. For comparison, in the past five years, the number of such apartments increased by an average of 600 per month.

According to the Ministry of Finance chief economist, the gap between the prices of apartments sold by investors and apartments sold by move-up home buyers seems to be closing. Whereas at the beginning of 2016 the average price of apartments sold by investors was 25% higher than the price of apartments sold by move-up home buyers, no such difference was noted in July 2016. This trend was particularly evident in Netanya, the leading area in the growth of investor sales in the past 18 months.

Another figure suggests that move-up home buyers also believe that home prices will decline: the number of 'apartments on hold'. In July, the number of such apartments dropped 18% compared with the end of 2015. The decrease in the number of such apartments, which move-up apartment buyers tend to 'hoard' in periods in which continued price rises are expected, might be indicative of a change in their expectations.

Published by Globes [online], Israel business news - www.globes-online.com - on September 12, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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Sample apartment, photo: Ministry of Construction
Sample apartment, photo: Ministry of Construction
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