Real estate drops 1.4% in May

Prices still 10% higher than a year ago, Finance Ministry says

construction 311 (photo credit: Ariel Jerozolimski)
construction 311
(photo credit: Ariel Jerozolimski)
During the month of May, prices of new homes dropped the most since the beginning of the year, alongside a renewed increase in the number of home purchases, the Finance Ministry reported on Tuesday.
“Since the beginning of the year, prices of new apartments continued to fall at a moderate rate. In May, though, prices dropped at the sharpest rate, 1.4 percent, compared with the previous month,” the ministry said in its “Red Lights” economic survey report. “The declines in property prices were steeper for apartments at a sales price of over NIS 2 million.
In certain areas, foreign resident buyers represent a significant weight in the category of buyers of homes valued at over NIS 2m. In recent months, there has been a declining trend in home purchases by foreign residents, in particular in the Tel Aviv area, showing sharp declines of 60% and 40% in April and May, respectively, compared with the same months last year.”
However, real estate prices in May were still 10.1% higher than in the same month last year.
Prices for new homes during the month of April fell by 0.8% compared with the previous month. Over the past year, property prices have risen by 22%, and by 30% in the past two years, while during the same period, demand for real estate, in particular for investment purposes, had increased.
Furthermore, the report found that last month there was a renewed surge in the number of home purchases, after months of declines.
Apartment sales transactions in May rose by 35% compared with April, during which the number of home purchases fell by 26%. During the past month, a total of 9,210 homes were bought. However, in comparison with the same month last year, the number of apartment sales transactions was still 1% lower in May 2010. In certain areas such as Tel Aviv and the center, numbers on a year-on-year comparison were lower by 8%.

“The moderate decline in the number of real estate transactions in May compared with the same month last year was due to a moderate increase in the purchase of second-hand apartments which offset the sharp decline in new home purchases,” the Finance Ministry said in the report.
The ministry noted that the May findings point to a slowdown in the rate of apartment sales by investors in almost all areas of the country except Tel Aviv and Beersheba, following an increase in previous months since September 2009.
“What this means is that in recent months there was an increase in the supply of apartments as investors exited the market, which came to a halt in May,” stated the report. “Hence if there is no renewed increase in the rate of apartment sales by investors there will be a decline in the supply of apartments available for sale.”