Data released by the Ministry of Finance today shows a further cooling in the housing market, with a sharp drop in home sales in January 2011. The widening of the betterment tax exemption, which came into effect in January, has not yet had an effect. However, the increase in the purchase tax resulted in the proportion of apartments bought for investment to fall to a multiyear low.
Sales of new and second-hand homes fell 19% in January from December. Second-hand home sales fell 13%, and new home sales fell 32%. If sales at a Rehovot project in December are excluded, new home sales fell 17% in January.
The Ministry of Finance says, "The fall in sales in high-demand areas in central Israel was higher. The Tel Aviv area stands out, with a 20% drop in purchases of second-hand apartments and a 40% drop in purchases of new apartments. On the other hand, the drops in sales in Jerusalem, Haifa, and Beersheva were below the national average."
The Ministry of Finance's widening of the betterment tax exemption and the increase in the purchase tax on the purchase of a second and subsequent apartments came into effect in January. The latter measure aims to encourage investors to quit the real estate market and put apartments on the market to alleviate the housing shortage. The ministry said that purchase tax hike resulted in a 34% drop in home purchases by investors. However, the ministry says that the widening of the betterment tax exemption has not yet had a major effect on the ground.
The increase in the purchase tax on additional homes also lowered the proportion of apartments bought by investors to 25% of all apartments in January from 33% in December.
Published by Globes [online], Israel business news - www.globes-online.com - on March 10, 2011
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