One out of three apartments purchased during the second quarter were bought for the purpose of investment as record low interest rates and volatile stock markets prompted investors to switch course, the Finance Ministry reported on Tuesday.
"The percentage of apartments bought for investment reached a record following years of continued growth since 2002, when the rate stood at 22 percent. In the second quarter of the year, one-third of all purchased apartments were bought by investors," said the Finance Ministry.
"One of the reasons for the rapid growth seen since the start of the century for the purchase of apartments as an investment is the tax reform implemented in 2003 and the start of the outbreak of the global economic crisis in mid-2007, which shifted capital from the stock market to the real estate market."
The domestic and global economic climate triggered a change in Israel's property investor map that started in 2008, as more and more buyers moved away from Tel Aviv and the Central Region and investment appetite moved to the more affordable property markets in Beersheba and Haifa.
The proportion of apartments purchased for investment in the Beersheba area rose from 18% of all purchased flats in 2007 to a high of 30% in the first half of this year. The main reason for the change in the regional trends was attributed to limited financing that narrowed options of investors to the Beersheba area, where prices are lower.
In a similar trend, the property market in the Haifa area succeeded in luring investors away from Tel Aviv and the Central Region.
"In comparison, though, to buyers in the Beersheba area, investment in Haifa's market was dominated by local residents from Haifa and the North," said the Treasury. "Although the proportion of investors abandoning Tel Aviv and the Center for Haifa doubled over the last two years to 13.6%, it is still low compared with the Beersheba area. What this means is that the potential of a fast return on investment is greater in Beersheba than in Haifa."
As for Tel Aviv, the report found that more than half of new apartments sold in the city were bought by investors, opposite the national average of 30%. In Jerusalem, only 24% of all apartments were bought for purposes of investment, because housing starts in the capital do not target investors, in contrast to the luxury projects under construction in Tel Aviv.
"This difference is apparent in the gap in prices for new apartments between the new apartments in Jerusalem and those in Tel Aviv - a price gap that does not appear for second-hand apartments," said the Finance Ministry.