Home sales falling, investment purchases hit new low

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The proportion of housing purchases by investors fell to a historic low of 13% in February.

8,700 homes were purchased in February 2018: 7,600 of them on the free market and 1,100 under the buyer fixed price plan. According to figures from the Ministry of Finance's chief economist, when discounted housing units are excluded, the number of purchases was 12% fewer than both the number sold at market prices in February 2017 and the number sold in January 2018.

At the same time, even when discounted housing units are included in the deals made in February, the number of purchases was still 4% less than in the preceding month and 2% less than in the corresponding month last year. This shows the downtrend in the sector, especially given the fact that the 1,100 discounted apartments sold in February 2018 was the highest number so far.

As in previous surveys, the Ministry of Finance refers in its current survey to the contractors' potential cash flow from the sale of new homes. The figures show that this cash flow amounted to NIS 4.5 billion in February, 9% more than in the January 2018. The Ministry of Finance emphasizes that the increase in this figure results from more substantial sales of discounted apartments in the buyer fixed price plan framework: "The main beneficiaries from the rise in cash flow in February were the contractors who sold housing units under the buyer fixed price plan."

The growing dependence of the contractors' cash flow on the extent to which they take part on the buyer fixed price plan is also reflected in the change in their rating according to sales volume. For example, two companies that were not even among the 100 largest in 2015, the peak year in the number of deals in the real estate market, entered the list of the top 10 contractors (developers) in Israel in 2017. This means that contractors who decided to take part in the buyer fixed price plan are suffering less damage from the downturn in the sector.

One of the most prominent figures in the current survey refers to the proportion of housing purchases made by investors, which plummeted to 13% in February, a historic low, according to the Ministry of Finance. Investors purchased only 1,100 homes in February, 29% fewer than the number of homes they purchased in both January 2018 and February 2017. The steepest declines in purchases by investors were in Tel Aviv (50%) and the Netanya area (70%).

At the same time, sales of housing units by investors dropped by 18% in February, compared with January 2018. A calculation of the stock of housing units held by investors shows that the number fell by 630 housing units in February, and has gone down by no less than 9,400 housing units since April 2016. As long as institutional rental solutions are inadequate, this figure means that there are fewer housing units available for rent. On the other hand, these housing units have been put up for sale to the general public, which has increased the supply of housing units for buying.

Published by Globes [online], Israel business news - www.globes-online.com - on April 15, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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