9,800 housing units were sold in Israel in December 2016, the fewest number of deals since December 2011 during the social protest, according to a residential real estate survey by the Ministry of Finance chief economist published today. The review also reports that the proportion of deals by investors, while investors are selling housing units at an increasing rate.
The Ministry of Finance noted that there was a substantial difference in the amount of deals between secondhand housing deals and purchases of new housing units. While deals in the secondhand market rose 7% in December, in compared with November 2016, new housing deals remained stable, having been influenced to a significant degree by sales of new housing units to eligible buyers in the buyer fixed price plan.
In comparison with December 2015, the number of new housing units sold fell by no less than 28%. "Note that this steep fall extended to all regions, except for two regions in which apartments were sold in the buyer fixed price framework. This continues the downtrend in new apartment sales since March 2016, close to the time when sales to parties eligible for the buyer fixed plan began," the review stated.
The review also reported a continuation, and even an acceleration, in the decline in the proportion of housing purchases by investors. "The total number of housing units purchased by investors in December 2016 was 1,600, down 7%, compared with November 2016, and 30% less than in December 2015. The proportion of total purchases by investors dropped to on 16%, the lowest level since the low point reached in July 2016 immediately after the purchase tax for investors was raised."
The Ministry of Finance is attempting to attribute the drop in the proportion of purchases by investors to the tax imposed on owners of three or more housing units, which passed as part of the Economic Arrangements Law and went into effect. At the same time, it also explains that this trend began when the Ministry of Finance took action against housing investors by raising the purchase tax.
The Ministry of Finance also believes that the taxation measures were not the sole cause of the investors' turnabout; a change in expectations also played a role. "It is possible that beyond the direct effect of the law concerning multiple property owners, the law also had a psychological effect on all potential investors, which combined with other factors to reduce purchases by investors (such as the increase in the mortgage interest rate and a change in expectations concerning a further rise in prices)." The survey further stated that the areas in which the most significant change in purchases of housing for investment was observed were the outlying areas, with an emphasis on Beer Sheva, and less in central Israel.
Another interesting point in the survey was the Ministry of Finance analysis of the drop in housing purchases for investment in outlying areas, due, among other things, to investors' concern that the new legislation would also lead to a change in taxation on rental income: "An analysis of the findings shows that it is possible that the steeper drop in outlying areas in purchases by holders of multiple properties is at least partially attributable to concern about stepped up enforcement of the tax laws applying to property owners following the new legislation (including enforcement of tax on rental income)."
This concern resulted from the situation create following the law on owners of three or more housing units, in which owners of housing units for investment will have to report the properties they own. This is frequently likely to expose ownership of housing units on which rental income had never been reported before.
The survey figures for sales of housing units by investors also show an increase; more investors sold housing units in December 2016. According to the figures, sales by investors were 12% higher than in the preceding month. Because of this increase in sales by investors, a third of the housing units sold on the secondhand market were sold by investors, the higher such proportion since 2010.
Published by Globes [online], Israel Business News - www.globes-online.com - on February 12, 2017
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