According to the Ministry of Housing, the total number of transactions this year is higher than in the last decade (annual average of about 106,000 transactions), despite the sharp decline in transactions in April-May, in the midst of the first corona wave. These transactions also include transactions that are not for monetary consideration (such as a transfer of ownership that is not in a sale process such as an inheritance and the like). After deducting these transactions, the total number of real estate transactions according to the Ministry of Housing amounted to about 107,000.
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Rising demand alongside declining supply
(David Hacohen)
According to the editors of the survey, the volume of transactions of new apartments this year is significantly higher than the average in the last decade, following the upward trend that began in 2017 as a result of an increase in sales of price-per-tenant apartments.
The annual volume of transactions for second-hand apartments decreased from a level of about 87,000 in mid-2015 to about 73,000 at the end of 2020. On the other hand, the annual volume of transactions of new apartments increased from about 23,000 apartments at the end of 2012 to about 41,000 at the end of 2020. In fact, the share of new dwellings in total transactions increased from an average of 25% in 2014-2012 to 36% in 2020.
In addition, it notes that the increase in the transaction of new dwellings, along with the relative decrease in the transaction of second-hand dwellings, reflects a decrease in the supply of new dwellings – and affects the conduct of housing improvers (those who sell an owner-occupied dwelling). According to the data, housing improvers make up about a third of the total number of apartment transactions, and carry out about 38,000 transactions a year. In 2020, there was no change in the volume of transactions of housing improvers, but there was a significant change in the timing of the sale of the original apartment.
Housing improvers are divided into two groups: one is apartment buyers who have already sold their previous apartment, the other are apartment buyers while holding their previous apartment that they intend to sell. The second group is considered to own two apartments for the purpose of paying purchase tax, if 18 months have passed and the first apartment has not yet been sold.
According to the ministry’s data, until 2017 there was a fairly constant distribution between the groups, with the weight of those who sold their first apartment before purchasing the improved apartment standing at about 85% and the weight of the second group standing at about 15%. As of 2018, there has been an increase in the weight of the second group, with the ministry estimating that this is due to the increase in the purchase of new apartments by first apartment buyers as part of a price-per-tenant program and a relative decline in demand for second-hand apartments.
The data also show that since June 2020 there has been a sharp increase in their weight, probably following a temporary order for the corona period that extends the horizon of selling the apartment beyond 18 months, so that they will not be considered owners of two apartments for purchase tax. The data show that a high percentage of holders are implementing the temporary order, which supports the hypothesis that housing developers prefer to wait for a more worthwhile date for them, according to real estate market data indicating half-demand pressures and expected price increases.
The reviewers refer to real estate investors and mention that in 2015 the tax rate for buyers of investment apartments was increased, so that from 2016 there was a significant decrease in the execution of transactions for investment purposes. In 2019-2016, the weight of investors was 17% of total transactions, about 18,000 transactions. On average per year, compared to 23% in the years 2015-2012, about 26,000 transactions per year on average.
According to the data, at the beginning of 2020 the share of buyers of apartments for investment continued to decline and in July deepened to 13% of total transactions, but following the reduction of the purchase tax on second apartments starting in August – there was an increase in purchases of apartments for apartments in August-December. The total investment transactions in these months averaged 2,410 per month, compared to 1,320 in January-July.
According to the review’s editors, the purchase of apartments for investment contributed greatly to the increase in the volume of transactions in the second half of the year. “On the one hand, lowering the purchase tax has pushed first-time home buyers out of the market, and on the other hand, the increase in purchases of investment apartments is increasing the supply of apartments for rent, which may affect future rental prices,” they explain.
The Ministry of Housing is also referring to a reduction in the stock of apartments for sale. According to the data, the result of the increase in the number of transactions, along with the decrease in the volume of construction starts, is a reduction in the inventory of new apartments for sale. According to data from the Central Bureau of Statistics (CBS), the inventory of new dwellings for sale has decreased over the past year by 22%, from a level of about 49,200 dwellings in January, to about 38,400 in December.
Respectively, the number of supply months (number of sales months that this inventory will suffice according to the average monthly sales in the last three months) of these dwellings decreased, from a level of 17.5 supply months on average in 2019 to 10.1 December 2020. The ministry warns that “this indication “The volume of construction we have been warning about over the past year. The continued decline in the volume of construction starts will lead to a continuous reduction in the stock of new dwellings for sale and may make a significant contribution to the rise in prices.”
The review also refers to the volume of mortgage payments, which in the past year amounted to NIS 78 billion – a record for the volume of mortgages so far. The editors of the review mention that since mid-2017 there has been a continuous and consistent increase, except for a decrease in April-May 2020, following the onset of the corona crisis; In the last decade, the volume of mortgages has increased by 67%, compared with a 57% increase in the housing price index. In other words, the Ministry of Housing explains that this is an increase rate beyond the increase in the price of apartments, which reflects the expansion of mortgage volumes and the increase in the leverage rate of those loans.
According to the data, in 2020 more than 100,000 mortgage loans were made, with the average mortgage amount being NIS 780,000, compared to 96,000 loans in December 2019, and an average mortgage amount of NIS 705,000. The average mortgage amount increased throughout the year, so that in December 2020 it was NIS 820,000.
The authors of the review mention that in 2015 the total mortgage loans amounted to about 111,000, but this was a one-time event in which an announcement was made about raising the purchase tax rate – “and a window of opportunity was created to make purchase transactions before the tax came into force.” Mortgages in a short time. ” The average mortgage amount at that time was about NIS 580,000.