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Sales of new apartments fell by 9 percent in December, following a temporary correction, as contractors raise prices, according to a report published by the Finance Ministry on Wednesday.
"Following a temporary recovery in the level of sales of apartments during the month of November, sales of new apartments dropped by 9% in December," said the Finance Ministry in an annual report on the local real estate market for 2009.
During the same period, the sales of second-hand apartments rose by 6%. Apartment purchases for the purpose of investment remained stable during December.
In its regional analysis, the ministry found that there was an increase in apartment purchases for investment in the Sharon area and Jerusalem, alongside a decline in Beersheba.
Sales of new apartments purchased from building contractors rose by 7% in November after falling 30% in the previous months of August to October. The decline in sales of new apartment marks a turning point in the market after sales had been on a steady rise until August 2009.
The ministry's year-on-year comparison of new apartment sales showed that in December last year, 20% fewer apartments were sold than in December 2007 and 5% fewer than during the average for the month of December between 2002 and 2007.
"One of the reasons for the decline in sales of new apartments is attributed to the rise in prices by contractors during December after prices declined in the previous month," said the Finance Ministry.
"The decline in the trend of sales of new apartments since September - apart from November - alongside a fall in prices stems from the belief by potential home buyers that the price of apartments has come to a peak and interest rates will continue to rise."
The figures by the Finance Ministry showed that prices of new apartments surged by 3% during December following a decline of 7% in November, during which sales increased. From the beginning of the year, the price of new homes rose by an cumulative 20% in nominal terms.
Furthermore, the level of apartments bought for the purpose of investment surged by 51% in December compared with the previous month and by 90% compared with the first and second quarter of 2009.
On the back of an increase in the sales of second-hand apartments, a total of 9,203 apartments were sold during December, 2.1% more than in the previous month. The number of new and second-hand apartments bought by foreign residents rose by 5.1% in December compared with the previous month and amounted to a total of 258.
According to the annual report, a total of 102,000 new and second-home apartments were sold during 2009, representing an increase of 8.5% compared with the previous year. Over the course of last year, 31,000 apartments were bought for the purpose of investment, 13% more than in 2008. The ministry said that the rise felt mainly during the months May to August last year, was fueled by record low interest rates of 0.5% during the period.