A record of 20 years in the sale of new apartments in December 2020

Despite the corona crisis, the real estate market showed recovery in the second half of the year: In 2020, 107,000 apartments were sold – a decrease of only 2% compared to 2019. This emerges from a survey of the residential real estate industry, published today (Wednesday) by the chief economist at the Ministry of Finance, Shira Greenberg. The central area stands out with a 16% decrease in the number of apartments sold in the past year. 11%.

December alone recorded one of the highest levels of transactions in the real estate market, at least in the last 20 years (except 2013), when these amounted to 13,400 apartments sold. According to the Treasury, this is the highest level of transactions in one month since The record level was recorded in June 2015, against the background of a wave of acquisitions by investors in the same month before the increase in the purchase tax on apartments purchased for investment (then the number of transactions was 17,000).

Compared to December 2019, this is a 20% increase in the number of transactions and a similar growth rate compared to November 2020. Excluding government-subsidized sales (ie as part of a occupant price plan), total transactions in December were 11,800 apartments – also the highest level of free market transactions since June 2015. Compared to December 2019 this is a sharp increase of 27% and an increase of 15% compared to the previous month.

Compared to December in the last 20 years, it was found to be the highest level since December 2013, when there was an abnormal level of transactions against the background of early investor sales before the entry into force of the abolition of the praise tax exemption on apartments sold by investors.

The Ministry of Finance notes that similar to the days before the second closure, in the week before the third closure there was a sharp increase in the number of transactions. The average daily transaction was 182 apartments – a figure 34% higher than in the previous week and 50% higher than in the first two weeks of December. In the week of the closure itself, the daily sales rate continued to rise, although the purchase of two REIT funds, which bought apartments for rent, contributed to this. “It is possible that the proximity of the start of the closure to the start of the vaccination campaign instilled optimism in the buyers and they hurried to close a deal,” the review’s editors note. However, preliminary data for January indicate a significant decline in the sale of new apartments.

The data show that 8,000 second-hand apartments were sold last December – an increase of 21% compared to the same period in 2019 and a 12% increase compared to November 2020. Sales were made mainly in the Haifa, Beer Sheva and Hadera areas. In the Tel Aviv area, there was a 9% decrease in the sale of apartments, with the Ministry of Finance noting that the area is characterized by a weakness in sales of second-hand apartments.

In an annual summary, 68,000 second-hand apartments were sold in 2020 – also a decrease of 2% compared to 2019. In the Tel Aviv area, there was an annual decrease of 14%. As for new apartments from a contractor, 39,000 apartments (including “price per occupant”) were sold in the past year by contractors – a moderate decrease of only 1% compared to 2019. After deducting government-subsidized apartments, the contractors executed 25,000 transactions – an increase of 9% compared to 2019.

In December alone, 5,400 apartments were sold by contractors – the highest level in the last 20 years. Compared to December 2019 this is an increase of 18% and 33% compared to the previous month. After deducting government-subsidized sales, 3,800 apartments were sold by contractors – the highest level since June 2015. Compared to December 2019 this is a sharp increase of 43% and an increase of 23% compared to November 2020.

The increase in sales included the areas, with the exception of the Tiberias area, which recorded a decrease of 28%, and the Tel Aviv area, which recorded a decrease of 6%. In the Jerusalem area, the number of new apartments sold in the free market has doubled, following sharp growth rates since last August (the Jerusalem area includes Beit Shemesh, where there is massive construction in ultra-Orthodox neighborhoods). In the Beer Sheva area, the number of new dwellings sold also doubled, after a decrease of 17% in November (the only area in the same month that recorded a decrease in sales in the free market).

The Ministry of Finance notes that in a number of areas (Tel Aviv, the center and Beer Sheva) about 200 apartments in the free market were sold in December by REIT funds and companies that designate the apartments for rent. Since the outbreak of the Corona plague, 1,300 apartments for rent have been sold in the past year – a 30% increase compared to 2019 and a 70% jump compared to 2018.

About 40 percent of the apartments sold by contractors in December were “on paper.” This is at a time when at the beginning of the epidemic, against the background of the first closure, more apartments were sold with immediate delivery, due to the buyers’ fear then of buying apartments that were not immediately populated. The cash flow of the contractors reached a record amount of NIS 9.6 billion – an increase of 25% compared to 2019. About one-fifth of it resulted from the sale of price-per-tenant apartments. This is a relatively low figure from the weight of sales in 2019, which indicates a slowdown in these sales.

Investor sales also amounted to 2,500 apartments – an increase of 30% compared to December 2019. The Ministry of Finance notes that the increase in the sale of apartments by investors is significantly higher than the number of apartments sold by housing developers (18%) – a trend that has continued since last June. At the same time, the relatively high level of “exchanging hands” between investors was maintained. Thus, in December, this rate was 34% of the apartments sold by investors, eight percentage points higher than in December 2019.

Who are the same investors who sold their apartment in December? According to the Ministry of Finance, about 40% of them are self-employed / company owners, similar to this rate in the previous month. The Treasury can not determine whether the reason for the sale of the apartment is due to financial difficulties or other considerations; However, in the analysis of the total income (from business and capital gains) in 2018 of the self-employed who own an investment apartment, and sold their apartment during 2020, it was found that these income levels are lower than those of the self-employed who sold their apartment in early 2020.

For example, the self-employed among the investors who sold their apartment last December had an average total income of half a million shekels (gross per year) in 2018. This is compared to an average total income of nearly NIS 1 million among the self-employed who sold their apartment in January this year. . The Ministry of Finance explains that “assuming that pre-epidemic income levels are an estimate of the financial strength of the self-employed, these findings may suggest that the sale of the apartment is due, at least in part, to economic difficulties caused by the corona plague.”

In any case, the increase in investor sales fully offset the sharp increase recorded in parallel in investor purchases – and the stock of apartments held by investors remained unchanged in December. In fact, in the last three months, the inventory of apartments by investors has “frozen” after a prolonged decline since April 2016. During that period, the inventory of apartments was reduced by investors by about 27,000 housing units.

According to the Ministry of Finance, young couples purchased 6,200 apartments in December – an increase of 7% compared to December 2019 and a record level since the beginning of the last decade. After deducting the purchase of price-per-tenant apartments, this is 4,600 housing units – also the highest level of purchases in the free market by young people since June 2015. Compared to December 2019, this is an increase of 18% and an increase of 15% compared to the previous month.

The young couples continued to focus on the last month of 2020 in the Jerusalem area (especially Beit Shemesh) with a 36% increase in purchases, and a 44% jump was recorded in purchases in the Beer Sheva area. In the Tel Aviv and Tiberias areas, there was a decrease of 17% and 25% in purchases.

The total number of dwellings sold as part of the price per occupant in December amounted to 1,600 housing units – a decrease of 16% compared to December 2019, following the sharp declines recorded in the previous two months. However, for the first time since last June, there was an increase in these sales compared to the previous month (an increase of 66%).

As for housing developers (those who own an apartment and sell it for a larger property), they purchased 4,600 apartments in December – an increase of 22% compared to December 2019 and of 16% compared to the previous month. In their case, too, there was a decrease in purchases in the Tel Aviv area of ​​13% and a decrease of 2% in the Nazareth area. The Jerusalem and Netanya areas recorded an increase of 33% and 36%, respectively, following a sharp increase in the previous month.

The number of “shelf months” of apartments sold by housing developers, who bought an apartment before they sold their previous apartment (hence they are called “pending apartment” buyers), reached 28 months in December, one month higher than the previous month. Compared to December last year, the time period for selling a second-hand apartment was extended by eight months.