The hike in purchase tax for buyers of investment homes has had a substantial effect on the number of purchase by investors since June 2015, when the higher tax rate came into force; transactions in second-hand homes have grown significantly, mainly in the periphery; and sales of investment properties have risen sharply in recent months, again mainly in the periphery. These are the main emphases in the survey of the residential property sector published by the chief economist at the Ministry of Finance today.
Israelis bought 9,900 new homes in November 2015, 28% more than in the previous month, according to the figures in the chief economist's report.
In comparison with November 2014, the growth is just 2%. The Ministry of Finance points out however that November 2014 was when the number of transactions began to recover as it became clear that the plan for zero VAT on new homes for first time buyers promoted by then minister of finance Yair Lapid would not come to fruition.
As mentioned, the growth in transactions in November was led by the secondhand segment, with growth of no less than 31%. According to the Ministry of Finance figures, the growth in transactions was in all areas, but was especially prominent in the periphery. For example, growth of nearly 60% was recorded in Hadera and 38% in the Haifa and Tiberias areas, while in Tel Aviv the growth in the number of transactions was just 11%.
These numbers continue the trend seen in the previous months, in which the number of home purchases in the periphery rose, among other things because first-time buyers, people buying better housing, and investors, were all looking for cheaper properties. The Ministry of Finance says that the extent of purchase for investment in earlier periods may have been underestimated. It also says that analysis of deals in secondhand homes in November and in the second half of 2015 generally shows that these homes had risen in value much more than those sold in the first half of the year. The rise in value in nominal terms (between the price at which they were bought and the price at which they were sold) of the secondhand homes sold in November was 74%, 5% more than in the previous month, and 20% more in comparison with secondhand homes sold in the first half of 2015. The Ministry of Finance attributes this to the decline in the proportion of investors, who look for properties that have not risen sharply in value, among the homebuyers, and also estimates that owners of homes that have risen considerably in value may have decided to sell because they believe that the general rise in home prices is over.
In the market for new homes, the number of transactions rose 22% in November, but, as in previous months, the breakdown by region shows wide variations. Alongside a drop in new home purchases in Hadera, Tiberias and Jerusalem, there were sharp rises of 40-50% in Tel Aviv and Beersheva. The sharp growth in these areas was mainly in cheaper homes. It could be that the buyer price program, under which tenders have so far been completed mainly in the periphery, has led to a decline in sales on new homes in the areas concerned as potential buyers wait for apartments in the framework of the program to become available, while in other areas, where the buyer price program will have little impact, buying a new home is still an attractive option.
Although the survey is for November 2015, it contains figures for 2015 as a whole. These show that an estimated 120,000 home purchases took place last year, a record, according to the ministry. The record number is attributed to two factors: the release of suppressed demand after the zero VAT plan was effectively shelved, and the increase in purchase tax on investment properties, which made investors rush deals through before the rise took effect in June 2015. The Ministry of Finance puts the proportion of investment purchases in the second half of 2015 at 18%, which it says is a historical low.
Published by Globes [online], Israel business news - www.globes-online.com - on January 25, 2016
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