Home sales drop 2% in first quarter

Tel Aviv purchases tumble 17% as high prices spook potential buyers.

construction tel aviv 311 (photo credit: Ariel Jerozolimski)
construction tel aviv 311
(photo credit: Ariel Jerozolimski)
Home sales declined 2 percent in the first quarter compared with the previous quarter, the Finance Ministry reported Tuesday. The drop was led by Tel Aviv, where sales plunged 17% as prices rose.
“For the first time since 2004, there has been a decline in the number of transactions of residential apartments for two consecutive quarters,” said Galit Ben-Naim, the author of the State Revenue Administration report on the real-estate market in the first quarter of 2010.
“The largest fall in property sales was reported in Tel Aviv, bringing the level to the lowest point since the recession in 2003,” she said in the report. “The big fall coincided with a large rise in prices in 2009, driving young couples and investors out of Tel Aviv.”
Supervisor of Banks Rony Hizkiyahu on Monday announced new mortgage guidelines for banks in an effort to stem spiraling home prices. The new regulations are expected to lead to an increase in the interest rate on loans, which will make it more difficult for young couples to purchase an apartment.
According to the new guidelines, banks will need to put aside an additional provision of a minimum of 0.75% of the outstanding loan for a mortgage allowance of more than 60% of the price of a property, starting this April.
As a result, banks will be reluctant to grant mortgages of more than 60% of the property price. Until now, home buyers have been able to receive a mortgage of up to 70% of the purchase price.
If home buyers manage to receive a mortgage above 60% of the value of the property, they will be charged a higher interest rate.
New-home sales dropped 5% in the first quarter compared with the previous quarter.
New and second-hand purchases rose 17% in the first quarter compared with the first quarter last year.
“Comparing home-sale numbers with the first quarter of 2009 is misleading because of the low activity in the real-estate sector during that quarter, which was impacted by the global crisis,” the report said. “In comparison with the sales levels in the first quarters of 2006 to 2008, an increase of 7% was reported.”
Home sales dropped 17% in Tel Aviv in the first quarter compared with the previous quarter, the report said. The number of new-home sales in Tel Aviv declined 55% in the first quarter.
Sales dropped 7% in Jerusalem, 5% in Haifa and 2% in Netanya. They rose 4% in Beersheba and 2% in Rehovot.
Apartment purchases for investment purposes declined 13% in the first quarter compared with the previous quarter.
Prices of new homes, which peaked in December, declined 1% in the first quarter.
“However, in light of the sharp rise in prices during 2009, prices of new homes this March were still 21% higher than in March 2009,” the report said.
Prices for new homes in Tel Aviv fell 5.2% in the first quartercompared with the previous quarter. Prices dropped 2.2% in the centerof the country.
In Jerusalem, average prices of new apartments rose 24.7%, while the number of purchases fell 24%.
Prices of new homes rose 7.5% in Netanya, 4.7% in Beersheba and 2.3% in Rehovot.
Earlier this month, the Central Bureau of Statistics reported thatproperty prices in Israel had risen 15.9% in the first quarter comparedwith the same quarter last year. Nationwide, real-estate prices rose2.1% in the first quarter compared with the fourth quarter, thestatistics bureau reported.
The discrepancy in the reports stems from the sources they were basedon. The Finance Ministry report was based on figures from the StateRevenue Administration, which registers all real-estate transactionsreported to the Israel Tax Authority. The statistics bureau report wasbased on surveys.