The level of purchases in the residential housing market dropped to two-and-a-half-year lows in the second quarter, dragged down by the groups targeted for Finance Minister Yair Lapid’s zero-percent-VAT benefits, according to figures released Thursday by the Finance Ministry.
Overall, purchases fell 14% from the previous quarter, the lowest level since the last quarter of 2011, immediately following the housing protests in which thousands of Israelis poured into the streets, decrying the high cost of living.
The trend was more pronounced among the demographic targeted by the 0%-VAT policy, which would give a significant discount to young couples who had served in the army for new apartments under NIS 1.6 million.
According to the figures, new-home purchases by young couples dropped 30%, while overall purchases by young couples fell in line with the overall trend to 14%. The share of homes under NIS 1.6m. fell as well.
The figures appear to support critics of the proposed 0%-VAT law who warned that it would throw a wrench in the market until it passed. They also said it would be ineffective at lowering the overall cost of housing.
Though Lapid had promised the law would be ready to go by September, fierce opposition has delayed it until at least October. The figures released Thursday, however, related to the time period before the bill hit its latest snags, so any further repercussions will not be seen until third-quarter data is released.
Thursday’s figures also showed a 16% quarterly drop in residential real-estate purchases by investors, but investments still accounted for a 24% share of all transactions in the field.
Another shock to the housing market that will only be seen in the third quarter is the effect of Operation Protective Edge. Between the conflict, housing policy and overall lackluster economic performance, more bad news could be on the horizon.
Already, the drop in business has pushed two major real-estate firms into financial difficulties.
One of them, Z. Landau, filed for a 90-day stay of proceedings to restructure itself due to a cash crunch, which it attributed to the frozen market and Operation Protective Edge. It said its debts amount to some NIS 73m. The move left home buyers awaiting the completion of their apartments with a string of unanswered questions regarding the fate of their money and future homes.
In July, the U. Dori Construction company announced losses of NIS 250m.
to NIS 350m., greater than the company’s equity, which contributed to the downward spiral of its stock price.
Gazit-Globe, the biggest stakeholder, announced Thursday that it will inject NIS 200m. into the company.