The number of home sales was stable in February 2014, the Ministry of Finance reported today, even before Minister of Finance Yair Lapid's bombshell - the zero VAT plan for first-time homebuyers of new apartments. On March 24, the housing cabinet approved Lapid's proposal, and the ministry believes that preliminary data for March will show a large increase in home sales, "provided that there are not a large number of cancellations of purchases compared with previous months."
Contractors are already complaining about cancelled deals, following the announcement of the zero VAT plan.
The number of new and second-hand home sales was unchanged in February, both compared with January and with the corresponding month of 2013. There were 8,400 home sales in February, after a record of 14,000 sales in December 2013.
Home purchases by young couples and investors fell by 7% in February, but purchases by people seeking bigger homes rose by 7%.
"In view of these findings, the Tel Aviv and Central districts stand out, where the modest increase in purchases by buyers of bigger homes was not enough to offset the slump in purchases by investors and young couples (down 18% and 28%, respectively," says the Ministry of Finance. "The total number of transactions in these two areas fell 14% compared with February, and they were the only two districts where the number of transactions fell."
The Ministry of Finance attributes the drop in home purchases in central Israel to the expiration of large discounts for members of certain consumer clubs. The reference is the discounts offered to Hever (the IDF and security forces servicemen and pensioners NGO) in a project in Rosh Ha'Ayin. "The end of this sales campaign is also reflected in higher prices in transactions for new homes in February in this area, and a drop of over 40% in purchases of new homes in this area. This rise is due to the change in the mix of transactions for new homes in the Central District and because homes sales in this project were made at market prices in February."
Home purchases by investors fell 6% in February, and their proportion of total transactions fell by one percentage point. While home purchases by investors fell sharply in the Tel Aviv, central, and coastal plain areas, purchases jumped in Haifa and the Sharon, where they rose by 17%.
"Home purchases by investors in the Sharon in February boosted their proportion of total transactions to 27%, the highest level in this area since August 2010. For the sake of comparison, the nationwide share of home purchases by investors fell by 7 percentage points compared with August 2010," says the Ministry of Finance.
The ministry believes that the Bank of Israel's mortgage restrictions have driven young couples out of the housing market in the Sharon, and their proportion of total transactions fell from 45% in 2012 to 36% today.
Published by Globes [online], Israel business news - www.globes-online.com - on April 22, 2014
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