Sales of investment apartments rise

In November, 66% of purchases in TA area were for investment purposes.

Tel Aviv apt bldg (photo credit: Daniel Cherrin)
Tel Aviv apt bldg
(photo credit: Daniel Cherrin)
The number of transactions in the housing market rose 14 percent in November compared with October, driven by sales of investment apartments in Tel Aviv and the center of the country, the Finance Ministry reported Wednesday.
“The surge in the number of housing transactions was due to a sharp increase in the sales of second-hand apartments in the Tel Aviv area and center of the country, where sales by investors rose,” the Finance Ministry said in its “Red Lights” economic survey for November.
“In areas where sales by investors were stable or declined, such as Netanya or Jerusalem, there was no significant change in the number of transactions, including second-hand homes,” the report said. “This shows that... the supply in second-hand homes is influenced by the behavior of investors and less by people who want to upgrade their housing situation.”
In November, the number of home transactions rose 14% compared with October and 10% compared with November 2009. Sales of new apartments increased in Haifa, Beersheba and Tel Aviv, while in Jerusalem and the center of the country there was no significant change.
Sixty-six percent of new apartments purchased in the Tel Aviv area were a second, or investment, apartment.
Fifty-three percent of the apartments sold by investors were bought for residential purposes, the report said.
The median home price fell 0.8% in November compared with October.
Home prices dropped 2% in the Jerusalem area and 1.8% in the Tel Aviv area. Prices rose 1.3% in the Haifa area and 0.3% in Rehovot.
The Finance Ministry attributed the decline in property prices to directives issued by the Bank of Israel last year to cool down the real-estate market.
New regulations for mortgages that came into effect in July made loans more expensive for home buyers seeking a mortgage of over 60% of the value of an apartment.
Thirty-six percent of investors who sold apartments last year had sold at least one additional apartment over the past six years, indicating that they had waited until they could sell without having to pay capital-gains tax, the report said. Currently, owners who want to sell need to wait four years to be exempted from the capital- gains tax.
“For these investors, the special exemption on the capital-gains tax, which comes into effect from January 11, will be effective,” the Finance Ministry said.
In recent years, the number of apartments purchased for investment purposes increased sharply, representing 30% of all housing transactions in 2009. That contributed to a surge in real-estate prices, making it harder for first-time home buyers and young couples to find affordable housing.
In an effort to encourage the sale of apartments and boost supply, the Finance Ministry decided to cancel the capital-gains tax for sellers of a second and third investment apartment for a period of two years.
In addition, it is raising the purchase tax on investment apartments.
For the next two years, the tax will be 5%, up from 3.5%; 6% on apartments worth NIS 1 million to NIS 3m., up from 5%; and 7% from those worth more than NIS 3m.