While the proportion of apartments with a safe room (MAMAD) in Israel is 38%, during 2024, their share of second-hand transactions ranged between 53% and 58%, according to a groundbreaking analysis by the Ministry of Finance, which also examined the impact of safe rooms on prices. In the first-hand market, contractors enjoyed an unusual cash flow, possibly driven by buyers rushing to complete VAT payments before its increase.
By Doron Brewitman, Nadlan Center
For the first time, the Ministry of Finance analyzes second-hand transactions based on the frequency of deals involving apartments with a safe room, against the backdrop of increased demand for such units during the “Iron Swords” war. The analysis is included in the Chief Economist’s real estate review published today (Wednesday). The analysis shows that the share of transactions involving apartments with a safe room significantly exceeds their proportion in the housing market, with a marked increase beginning after the first Iranian missile attack in April. This share stabilized in July and August, followed by a renewed surge in September, peaking in October. Preliminary data for November indicate a further rise.
“It is likely that the renewed spike in the proportion of second-hand transactions involving apartments with a safe room, beginning in September, is linked to the increased rocket fire from Lebanon that month, coinciding with the IDF’s ground operation in Lebanon. Furthermore, heightened tensions with Iran and the anticipation of a second attack, which ultimately occurred on October 1, likely contributed.”
According to the data, the proportion of transactions involving apartments with a safe room ranged between 53% and 58% of all second-hand transactions. In comparison, the national proportion of apartments with a safe room is around 38%. It was also found that “Jerusalem and the Sharon areas stand out with a significant increase in second-hand transactions involving apartments with a safe room following the first missile attack from Iran.” The intensified rocket fire from Lebanon in September-October led to a renewed increase in such transactions, with Tel Aviv seeing this proportion jump to 38%, compared to only 24% of apartments with a safe room in the city.
In Haifa, where the intensification of rocket fire from Lebanon was most pronounced, there was no dramatic rise in transactions involving apartments with safe rooms. The economist explained this as being due to the particularly low share of such apartments in the city (19%), which affects the volume of such transactions.
Another parameter analyzed was the impact of the safe room on apartment prices. Here, too, an effect was observed: “The average price of a second-hand apartment with a safe room in the central region returned to its level at the beginning of the year, while the average price of an apartment without a safe room dropped by 5.7% during the same period.” Similar findings were observed among first-time buyers in the region.
Decrease in investor and foreign resident purchases
In October of this year, 5,111 apartments, including government-subsidized apartments, were purchased. This represents a 123% increase compared to the historical low recorded last year with the “Iron Swords” war outbreak. However, compared to October 2022, there was no significant change in the number of transactions, as the number of workdays in both months was similar. Excluding government-subsidized sales, the number of free-market transactions in October was 4,608 apartments, 3% lower than in October 2022.
The review’s most interesting findings pertain to the second-hand apartment market, where 2,878 apartments were purchased in October, a 10% drop compared to October 2022. According to the Ministry of Finance, this is one of the lowest second-hand purchases recorded for October since the early 2000s.
The review also shows contractor sales in October totaled 2,233 apartments, including government-subsidized apartments. This is a 20% increase compared to October 2022. Compared to September this year, these sales were a 37% drop. Excluding government-subsidized sales, contractor sales in October totaled 1,730 apartments, a 13% increase compared to October 2022. There was a 38% drop in free-market contractor sales compared to September this year.
A geographical breakdown of contractor sales in the free market shows that the Be’er Sheva region continued to lead sales in October, with 325 apartments sold, representing a 16% increase compared to October 2022. The central region recorded the second-highest sales level, with 264 apartments, but this is a 13% decrease compared to October 2022. The Jerusalem area, which stood out in previous months with a sharp increase in sales, mainly due to high sales in Beit Shemesh, recorded a relatively low level of transactions in October with only 159 apartments, a 22% decrease compared to October 2022.
Investor purchases in October totaled 828 apartments, double the low recorded in October last year but 11% lower compared to October 2022. The share of investors in total transactions stood at 16%, slightly lower than the previous month and two percentage points lower compared to October last year. The share of new apartments in total investor purchases continued to decline in October, following a surge at the beginning of the year. This decline is particularly notable in the Tel Aviv area, which has the highest unsold inventory of new apartments.
Foreign resident purchases in October totaled 110 apartments, compared to the low of 42 apartments in October last year. These purchases decreased by 10% compared to October 2022. Investor sales in October totaled 885 apartments, a 16% decrease compared to October 2022. Consequently, the “inventory” of apartments held by investors decreased slowly, with about 60 apartments removed from the inventory in October.
First-time homebuyer purchases in October totaled 2,924 apartments, a 20% increase compared to October 2022. This was the only segment to record a rise in transactions. Excluding government-subsidized purchases, first-time homebuyer purchases in the free market totaled 2,421 apartments, a 15% increase compared to October 2022. Compared to September this year, first-time homebuyer purchases in the free market fell by 39%. In terms of daily average sales, this represents a 21% decrease. Transactions among housing upgraders totaled 1,359 apartments, a 20% decrease compared to October 2022. Compared to September this year, this is a 21% drop in daily average sales.
