27% drop in apartment sales in the second quarter

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The failed struggle in Corona has led to a stagnation of the real estate market, according to the chief economist at the Ministry of Finance Shira Greenberg published today (Sunday). The review deals with the second quarter of 2020, ie from April to June.

The main index in the review, from which one can learn about stagnation, is the number of transactions for the sale of an apartment – it shows that in the second quarter of the year 19,500 transactions were closed, down 27% compared to the second quarter of 2019, and the lowest level since 2011. In addition, according to Greenberg, the stalemate would have been deeper had it not been for a price-per-tenant program, in which apartments are sold at a discounted and subsidized price.

Thus, the survey shows that in the free market – excluding the price per occupant – only 16,800 apartments were sold, a decrease of 25% compared to the first quarter of the year, at the end of the epidemic, and a decrease of 27% compared to the second quarter last year. In fact, the number of transactions in the free market in the second quarter of 2020 is lower than in any other quarter since the third intifada in 2003.

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Photo: David Hacohen

A regional segmentation of the data shows that the sharpest decline was recorded in areas of demand, where apartment prices are relatively high. Thus, in the central region, 2,552 transactions were counted, 41% less than in the corresponding quarter last year, and 28.4% less than in the previous quarter; In the Tel Aviv area, 1,317 transactions were recorded – 33.6% less than in the second quarter of 2019 and 41.3% less than in the previous quarter of the year. In contrast, in the Beer Sheva area, for example, 3,227 transactions were recorded – 2.7% more than in the second quarter of 2019, and only 15% less than in the previous quarter.

The stagnation in the housing market is also reflected in the fear of housing developers to take risks in light of the uncertainty in the economy. The Ministry of Finance found that 27% of housing developers purchased a new apartment before selling their apartment, compared to 32% in the previous quarter and 29% in the second quarter of 2019. The Ministry of Finance states that “this expresses the fear of housing developers to commit to buying an apartment before selling Their previous apartment. “

There was also a stagnation in the investment housing sector, with investors buying only 2,300 apartments in the second quarter. According to the Treasury, this is “a historic low in these purchases and a decrease of 32% compared to the corresponding quarter last year, and the lowest level at least since the beginning of the decade.” Of the total transactions, investors concentrated about 12% – the lowest level of this parameter at least since the beginning of the previous decade. “The stagnation was also reflected in the number of apartments sold by investors and stood at 3,900 – a sharp decrease of 26% compared to the same quarter last year.

The explanation for the decrease in the number of apartments that investors have sold lies not only in Corona, but also in the expectation of a reduction in the purchase tax on investment apartments.

The decline in the purchase of apartments for investment has hurt state revenues. The survey shows that the total purchase tax charges on investors in the second quarter of 2020 amounted to NIS 300 million, a decrease of 42% compared to the corresponding quarter last year. In the first half of 2020, these tax charges amounted to NIS 780 million, a decrease of 22% compared to the corresponding period last year.

The average real capital gain in apartments sold by investors in the second quarter of this year was NIS 344,000, an amount 28% lower than in the corresponding quarter last year.

At the same time, there was an increase in the number of apartments sold at a loss by investors: while last year the rate of these apartments was 7.4% of the total number of apartments sold by investors. In the first quarter of the year it rose to 10%, and in the second quarter it had already reached 14%. In Be’er Sheva, where many apartments were bought for investment, the rate of apartments sold at a loss has already reached 20%.

The Ministry of Finance explains the increase in the rate of apartments sold at a loss in a point price drop following the Corona crisis, and also believes that some investors rushed to sell their apartment even before making a profit, fearing that the loss would deepen.

The effect of the corona crisis on investors is also reflected in the fact that the rate of going to Khalat among investors who sold an apartment at a loss in the second quarter of the year is 2% higher than the rate of those going to Khalat among all investors who sold an apartment – 16% 14% of all investors who sold an apartment. This gap indicates that those who went to Khalat were more eager to sell the apartment.

In the second quarter of the year, young couples bought 10,100 apartments – a decrease of 19% compared to the previous quarter, and 24% compared to the second quarter of 2019. 7,300 of the apartments were bought on the free market and the rest (2,800) as part of the price per occupant. The Treasury notes that they expected a sharper decline in the number of deals made by young couples, and this is because this group has suffered the most painful economic damage following the struggle in Corona. In addition, it was found that about 25% of first-time home buyers in the last 5 years were expelled. Assuming that the composition of first-time home buyers did not change compared to previous years, the Treasury expected a 25% decrease in first-time home purchases by young people. It is reasonable for the Ministry of Finance to estimate that those who go to Khalat will postpone the purchase of the apartment. The Ministry of Finance assumes that many were still able to purchase an apartment because they were helped by their parents.

The Ministry of Finance shows that young couples whose joint salary is low and one of whom is in the Knesset, got into trouble because they did not anticipate the second closure. Represented an average of 55% of the salary of both spouses, and many of these couples reduced risk and postponed the purchase. For comparison, among young couples with a similar salary who purchased an apartment in 2019, the salary of the spouse who went to the Knesset was 68% of the salary. At the same time, the Ministry of Finance estimates that if the couples who purchased an apartment in the second quarter knew they were close. It is doubtful whether, in retrospect, on the eve of the imposition of another closure, all of these households, certainly the relatively weakest of them, would have made the same purchase decision as they did when leaving the first closure. “

The total number of new dwellings purchased in the free market in the second quarter of the year by those for whom this is their first dwelling was 1,400 dwellings, a sharp decrease of 30% compared to the corresponding quarter last year and the lowest level in these purchases since the second quarter of 2014. The market segment of second-hand apartments, which constitute the bulk of the purchases of young couples in the free market, recorded a decrease of 23%, thus moderating the total decrease in purchases of young couples in the free market.

Housing developers – that is, apartment owners seeking to replace another apartment – purchased 7,200 apartments in the second quarter, the lowest level since the last quarter of 2011, which stood in the shadow of social protest. Compared to the corresponding quarter last year, this is a decrease of 28% – the sharpest in these purchases since the last quarter of 2011.







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