Were it not for the investors, we probably would not have seen a 15% increase in sales of new apartments compared to November 2019. The investors, who to a considerable extent were responsible for the increase in real estate prices in the previous two decades and whose steps were reduced by tax increases, are more or less saving the Contractors. Laughter of Fate? Not exactly. More like a warning light.
According to a survey of residential real estate by the Chief Economist at the Ministry of Finance for November 2020, last November “11.1 thousand apartments were purchased, an increase of 15% compared to November last year and a sharper increase of 45% compared to the relatively low level recorded in the previous month.” Of October for the holiday period and the start of the renewed closure at the end of October.
“After deducting government-subsidized transactions, the number of transactions in November amounted to 10.2 thousand apartments, an increase of 25% compared to November last year and an increase of 52% compared to last October. This is also the highest level of these purchases in November since 2009,” the Ministry of Finance wrote.
It was investors who led the increase in transactions in November. The total number of dwellings purchased by this segment of the market was 2.1 thousand dwellings, the highest level of these purchases since April 2016. Compared to November last year, this is an increase of 75%. The share of investors in total transactions was 19%, 6.5 percentage points higher Compared to November last year and 1 percentage point higher than in the previous month, however, this rate is still significantly lower compared to the period before the tax increase in June 2015.
Investor sales in November also totaled 2.1 thousand apartments, an increase of 33% compared to November last year and a growth rate twice as high as that recorded in the total sale of second-hand apartments. Since June, investor sales have been growing at a higher rate than those sold by housing developers, while at the same time the proportion of apartments “exchanging” hands between investors has increased significantly. In November, this rate was 36%, nine percentage points higher than in November last year.
In the employment segmentation of the investors who sold their apartment, it was found that since the outbreak of the corona crisis, the weight of the self-employed and company owners among these sellers has been significantly higher, compared with their rate among buyers of investment apartments. In the northern periphery, there is a sharp increase in the sales of investors in general, especially those who are self-employed and company owners.
Contractors’ sales in November totaled four thousand apartments, of which 1,000 apartments were sold with government subsidies. Compared to November last year, contractors’ sales in the free market increased by a sharp 53%. Including sales with a government subsidy, the rate of increase in contractors’ sales is reduced to 13%.
“Price per occupant” sales continued to fall in November, by a sharp 38% compared to November last year. Since the outbreak of the corona crisis, these sales have fallen by 22% compared to the same period last year, a rate significantly higher than the decline recorded in young couples’ purchases in the free market.
Purchases of housing improvers in November amounted to 3.5 thousand apartments, a moderate increase of 4% compared to November last year. Added to extend the length of time required to sell a second-hand apartment.
“In a multi-year comparison of the number of transactions in the free market in the months of November in the last twenty years, it was found that last November is the highest since 2009. In summary, the total number of transactions, including government subsidies, last November is the highest,” they concluded.
The alarming trends emerging from the report
On the face of it, but only on the face of it, one can treat the peak of sales as it is. Record sales. But there are quite a few trends emerging from this review that show that we are facing a difficult economic period. The financial markets may not collapse thanks to the actions of the Bank of Israel, but that is not comforting.
More and more self-employed people and company owners are being forced to close their business gates, with the trend worrying in the periphery, as putting the property up for sale indicates difficulties in income flows and the fear of economic deterioration. When close to 120,000 people have become unemployed since the current closure, it certainly indicates where the currents are going.
Also, the return of investors is an important step, but they are not really saving the market. The current rise is mainly due to deals that got stuck in the pipeline last month. The fact that investors are not flocking in either, with the level of involvement still not approaching the level of 2016, indicates the caution with which people today treat all types of investments.
In any case, due to a further slowdown in construction starts last year and due to high demand, in the central region there is no decline in residential real estate prices. This is a fact. Demand far exceeds supply, while still, despite the situation, quite a bit of the middle class, especially , Have not yet been harmed by the situation. This is what allows the purchase of apartments to continue in the meantime. This does not mean that they are not preparing for rainy days and this wave of apartment buyers will not continue to fade.
In short, the new record compared to last year is not particularly impressive. On the contrary. It’s mostly worrying.