The strike at the Land Registry (Tabu) in January caused a 40% drop in home sales in January 2014, compared with the preceding month, says the Ministry of Finance in its monthly Red Lights macroeconomic report. Second hand home sales were halved and purchases of new homes were down 14%. Home sales in January were down 7% compared with January 2013, mostly in the second-hand homes segment.
In addition to the strike at the Land Registry, a contributing factor to the drop in home sales in January was the sale of apartments investors in December before the exemption on capital gains tax came into effect on January 1. Because of these two factors, only data for the subsequent months will show whether the real estate market is cooling down, or if the January data were just a blip. Preliminary data for February, which show a drop in transactions, suggest that the real estate market is cooling down
However, real estate market sources note that at a time of uncertainty in the housing market, because of government declarations about plans to lower home prices, homebuyers tend to wait, resulting in a drop in purchases.
The January data also show the continued hardship of homebuyers who do not already own an apartment. The number of first-time homebuyers fell 44% compared with December; the drop was nationwide, and most severe in Tel Aviv and central Israel where sales were down 60%.
At the same time, purchases of apartments by investors rose in January, especially in Tel Aviv, after falling in December. Investors paid substantially more for apartments in Tel Aviv than prices paid by buyers of apartments in which they intend to live: the nationwide median price of an apartment was the same for both investors and homebuyers; but in Tel Aviv, the median price of an apartment bought by an investor was 46% higher than the median price of an apartment bought by a homebuyer.
"This means that investors and homebuyers in Tel Aviv are not necessarily competing for the same apartments," says the Ministry of Finance.
Investors sold 44% fewer apartments in January than in December, with the cancellation of the capital gains tax exemption coming into effect.
Published by Globes [online], Israel business news - www.globes-online.com - on March 11, 2014
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