In the shadow of the Iron Sword War, the number of “pending apartments” held by homeowners who bought a new home and are obligated to sell their current home within a certain period of time reached 22,500, a 14-year high. As the sale date approaches, the pressure may affect the price level. And how is the tension on the northern border affecting the market?
By Nimrod Bosu, Nadlan Center
The survey of the residential real estate industry for the first quarter of 2024, published yesterday by the Chief Economist Department at the Ministry of Finance, includes quite a few findings that we already knew—such as the increase in the volume of home purchase transactions during the quarter, partly due to the influence of contractors’ attractive financing campaigns.
Alongside them, several new data were revealed, which can teach much about what is happening today in the housing market. Prominent among these data is the increase in the stock of “pending apartments” of those homeowners who purchased a new home but have not yet sold their previous one and now simultaneously own two apartments. According to the survey, at the end of the first quarter of this year, the number reached 22,490 apartments, the highest level since 2010. In addition, based on the current low rate of sales of second-hand homes, this inventory is expected to be sufficient for more than five months of sale if all second-hand apartments were purchased out of this inventory. We are already talking about “the highest level of this parameter since the beginning of the 2000s.”
It should be recalled that according to real estate tax laws, there is a limitation on the period of time in which housing upgraders can own two apartments simultaneously before they are considered investors. This period was two years in the past, but in the recent Arrangements Law, it was shortened to only a year and a half. Following the Iron Sword War outbreak, a temporary order was amended that extended the time that two apartments could be held.
Either way, as the date approaches when home improvers are forced to sell their apartments, they may do so under pressure, encouraging them to reduce the sale price. Recall that although the housing market woke up in the first quarter of the year, this awakening belongs almost entirely to the market for new apartments from contractors, influenced by sales promotions, while the second-hand market stagnates.
Second-hand sales totaled 12,600 homes in the first quarter, a moderate increase of 2 percent compared with the corresponding quarter last year. In contrast, contractors’ sales on the open market in the first quarter totaled 8,400 homes, a sharp increase of 39 percent compared with the corresponding quarter of last year. “The number of homes sold ‘on paper’ on the open market reached 5,000 homes, the highest level since the last quarter of 2021, which was overshadowed by investors’ purchases being brought forward before the purchase tax on them was raised,” the survey said.
Tel Aviv area at one of the lowest figures in the past twenty years
Overall, the first quarter of 2024 saw a recovery in the number of transactions after the low recorded in the last quarter of last year with the outbreak of the war. Total transactions on the open market stood at 21,000 homes, an increase of 14 percent compared with the corresponding quarter of last year and the highest level since the third quarter of 2022. This also halted the consecutive decline in these purchases since the first quarter of 2022.
According to the Ministry of Finance, “Despite the recovery in the number of transactions, a historical comparison shows that the first quarter of 2024 ranks in the bottom third of the number of quarterly transactions since the beginning of the 2000s, mainly against the background of a low level in second-hand transactions. The Be’er Sheva region is ranked the highest relative in this historical comparison, while on the other hand, the Tel Aviv area recorded one of the lowest quarters in the past twenty years.”
Another interesting detail shows that home buyers are reacting to the tension on the northern border, which has peaked in recent days. Among the ten leading cities in free market purchases in the first quarter, “Haifa is the only city that recorded a decline in the number of transactions compared to the corresponding quarter last year, against the background of a sharp decline in investor purchases in the city. Recall that this city also sharply declined transactions during the Second Lebanon War.”
A breakdown into the various segments of home buyers shows that first-home purchases on the open market in the first quarter totaled 10,900 homes, a sharp increase of 31 percent compared with the corresponding quarter of 2023. “The share of new homes purchased on the open market reached one-third of the total purchases in this segment, its highest level in at least the past 12 years. The contractors’ financing operations likely contributed to this increase,” it said.
8% increase in investor purchases
Housing upgraders purchased 6,468 apartments in the first quarter of the year, a decline of 4 percent compared with the corresponding quarter of last year. “This was the only segment in the market where the downward trend in transactions continued in the first quarter of this year, following consecutive declines since the first quarter of 2022. It is reasonable to assume that the continued decline in purchases of housing improvers is explained, among other things, by their difficulty in selling their previous home.”
Investor purchases in the first quarter totaled 3,600 homes, an increase of 8 percent compared with the corresponding quarter of last year. “Tel Aviv led these acquisitions with an increase of 44% compared to the corresponding quarter last year. An unusual increase was recorded in Beit Shemesh.” Overall, the share of investors in total transactions was 15 percent, 1 percentage point lower than in the corresponding quarter of last year.
It also noted that nonresident purchases included in the investor segment in the first quarter of 2024 “totaled 314 homes, a decline of 20% compared to the corresponding quarter last year. Their share of total transactions was only 1.3 percent, 0.7 percentage points lower than last year’s corresponding quarter. Thus, despite industry expectations of a sharp increase in purchases by foreign residents after the outbreak of the war, these have not yet been reflected in practice.”
