Minister of Finance Yair Lapid’s plan to waive VAT for first-time homebuyers has slowed the housing market somewhat. Mortgage bank sources have informed “Globes” that they are beginning to see signs of a slowdown, but the bigger picture will become clear in the next few weeks.
“We are liable to enter a period of interesting turbulence,” says a senior source in the field. “Announcements regarding intentions to take steps to reduce prices, in principle, cause the market to halt. The question is how long it will take to implement the steps. If steps are not decided upon soon, or if their implementation is delayed, it could cause the housing sector to stagnate, which would hurt contractors, and other companies in the field, such as building supply companies and real-estate agencies. Therefore, the uncertainty needs to be removed as quickly as possible,” he adds.
Bank sources also say that contractors have already reported cancelled deals, and customers who have said they are postponing signing. Second-hand apartment sellers have reported fewer interested potential buyers since the government steps were announced.
“Stagnation in the market could put contractors in a cash flow problem, which could bring down suppliers from other areas, such as tiles and cement. The weaker contractors, who have not built any surplus, and who based construction on current rates of sale, are liable to find themselves in serious trouble, and this could affect every last player in the sector,” said a senior bank source.
However, bank sources said that if, in fact, it is decided to implement zero VAT on first-home purchases (under whatever conditions are decided upon), and the implementation is quick, demand could actually rise in the mid-term, because more people will enter the housing market, and there will be more competition over a fixed number of apartments, which may even cause prices to rise.
As for the mortgage market, March started out strong, similar to previous months, and is expected to end with new mortgages totaling NIS 4 billion. However, due to the past week’s slowdown, it is possible the month will end with weaker figures than those we have become accustomed to.
Published by Globes [online], Israel business news - www.globes-online.com - on March 24, 2014
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