Housing price trends in the second quarter of 2014 were mixed. Prices of new and secondhand apartments were stable, compared with the preceding quarter, but rose sharply in comparison with the corresponding quarter last year, according to new figures published today by the Ministry of Housing. There have been few purchases of new, cheaper apartments since the 0% VAT plan was announced last March, while the number of more expensive new apartments sold has risen, resulting in a higher overall average price of all apartments sold. In comparison with the first quarter, average prices of new and used apartments were almost unchanged (only a 0.1% increase), but rose 4.4% in comparison with the second quarter of 2013.
The 0% VAT plan affects only apartments with prices up to NIS 1.6 million, and is restricted to people purchasing their first apartment. This explains why the number of transactions involving first purchases of new apartments priced at less than NIS 1.6 million has plummeted, while the number of transactions involving apartments prices at over NIS 1.6 million has risen. Investors and people looking for better apartments are still buying cheaper apartment, too, but in fewer numbers. It is possible that anticipation of the Ministry of Housing's target price plan, which is due to include people seeking better homes, is also affecting the number of these purchases. The Ministry of Housing states that the substantial drop in purchases of cheap apartments is one of the reasons why the average price of all apartments purchased has risen.
When a distinction is made between the average prices of new and second hand apartments, it is evident how the drop in the number of transactions following the announcement of the 0% VAT plan has affected prices. While the average price of secondhand apartments fell 1% and 0.5% in the second quarter, compared with the preceding quarter and the second quarter of 2013, respectively, average prices of new apartments rose by a substantial 2.5%, compared with the preceding quarter, and soared almost 13%, compared with the corresponding quarter last year.
The greatest price increase was for the most desirable apartments: new four-room apartments. The average price of a new four-room in the second quarter was NIS 1.47 million, 58% more than the average price in the preceding quarter, and 16% more than the average price of a new four-room apartment in the second quarter of 2013. The average price of secondhand four-room apartments dipped 0.7%, compared with the average price in the preceding quarter, and rose 2%, compared with the corresponding quarter last year.
Published by Globes [online], Israel business news - www.globes-online.com - on October 1, 2014
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