Investment levels at record highs: Who is investing in real estate in Israel?

In a record high, about 20% of the 31,000 apartments purchased in Israel in the first quarter of 2021 were purchased by investors. An analysis by the Ministry of Finance indicates that almost 40% of real estate investors are public employees, 17% work in the finance industry, and only 11% in hi-tech. While there was a sharp jump in the number of purchases by foreign residents in Jerusalem, there was a significant drop in Tel Aviv.

According to a survey of the residential Israel real estate market published by the Ministry of Finance, the first quarter of 2021 saw record highs in the number of properties purchased in general, with a particularly high percentage of apartments purchased for investment purposes. A total of 31,000 apartments were purchased on the free market – a 29% increase compared to the corresponding quarter of 2019. With 6,800 investment properties among them, this sector led to the staggering growth in demand for real estate investing in Israel with an increase of 85% compared to this period in 2019.

These numbers reveal that approximately 20% of all apartments purchased were bought by real estate investors, the highest rate in years. The Ministry of Finance attributed this jump in real estate investing in Israel to the July 2020 policy that reduced the purchase tax on investment apartments from a minimum tax level of 8% to 5%, as well as a drop in the Bank of Israel’s real interest rate.

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The report not only detailed the amount of investment purchases, but also the profile of the buyers, including their employment status. In 68.7% of investing households, at least one of the main breadwinners is an employee – an increase of 3% from last year. In 20.9% of cases, at least one of the breadwinners is self-employed. Only 4% of investment apartments were bought by households sustained exclusively by the self-employed. These rates are similar to last year. Approximately 18.4% of investors are retirees, and a similar percentage own their own companies. 

The average household income of those purchasing investment properties was NIS 69,500 per month, with the salary ranging from an average of NIS 188,000 per month for households headed by a company owner to NIS 30,000 per month for retirees. Overall, the report revealed that the average income of those investing in real estate this year was higher than last year.

When analyzing the data based on the employment sector, it was found that the greatest number of investment properties – 37.1% – were purchased from households investing in real estate in which at least one of the breadwinners is employed in the public sector in Israel. This is a sharp 5% increase compared to the beginning of 2020, before the outbreak of the COVID-19 crisis.

According to the report, “Against the backdrop of the shutdown of many industries in the business sector due to the pandemic, the percentage of investment buyers employed in the public sector increased significantly.”

A more detailed analysis shows that investors from the public sector are employed in the security forces, local government, and national institutions (such as the Jewish Agency and the JNF). All of these together accounted for 25.9% of the total number of investment properties purchased – 2.5 times higher than their share of all those employed in the country. 

Those who work in the financial sector accounted for 17% of all those investing in real estate in Israel — a rate of five times more than the weight of this sector out of total employees. However, before the outbreak of the pandemic, those working in finance actually made up 19% of investment buyers. Employees in the trade industries made up 13.2% of all investment properties purchased, a drop from 15.1% before COVID-19.

Those working in hi-tech comprise 11.5% of all investors, a slightly higher proportion compared to the 10% of hi-tech employees that make up the Israeli workforce. In contrast to other sectors, hi-tech saw a slight increase in employees purchasing investment properties – up from 10% before the pandemic. 

According to the survey, foreign residents bought 333 apartments in Israel during the first quarter of 2021, a decrease of about 5% compared to the corresponding quarter in 2019. A whopping 65% of all of those investment apartments purchased were located in the Jerusalem and Beit Shemesh area, a 60% increase compared to the same period in 2019.

In Tel Aviv, on the other hand, foreign residents investing in real estate in Israel purchased only 48 apartments, representing a 37% drop in purchases compared to the corresponding quarter in 2019. In the Netanya area, foreign residents purchased 34 apartments in the first quarter.

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The contents of this article are designed to provide the reader with general information and not to serve as legal or other professional advice for a particular transaction. Readers are advised to obtain advice from qualified professionals prior to entering into any transaction.

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