Chief economist at the Ministry of Finance: Real estate sales and prices decline

The investors are disappearing, the apartment buyers are sitting on the fence, the supply of subsidized apartments has decreased, and on the streets you can already feel the drop in prices. This is according to the review of the real estate market in November, published by the chief economist at the Ministry of Finance.
The declines in apartment sales and the signs of the approaching crisis in the industry - which began already in the middle of last year - have so far not affected the price indices of the apartments which continued to rise, at least until last September. The main factor shaking the industry is the interest rate increases by the Bank of Israel, which make the mortgage more expensive and mainly affect young couples and first home buyers, who use low equity and relatively high mortgage amounts.
A special examination conducted by the economist regarding the prices of apartments in the streets may show that the prices in the demand areas have already started to fall. According to the economist, who examined the transaction prices of first-time apartment buyers in the city, "it was found that, contrary to previous analyzes we conducted among this segment, the prices of the apartments purchased in November were slightly lower, by 2.1%, than those purchased by this segment last March, before the interest rate increases began Bank of Israel".
The number of apartments purchased in November amounted to only 7,800, a seasonal low of ten years and a decrease of 57% compared to November 2021. One of the reasons for the decrease is that in November 2021 there was a sharp increase in the volume of transactions, when investors tried to advance transactions in preparation for the increase in the purchase tax. If we subtract from the data about 500 apartments purchased as part of the government subsidy programs (sales that are almost unaffected by the conditions of the free market), the rate of decrease in transactions worsens by 58%, a rate that has not been remembered since the outbreak of the corona virus in early 2020.
The decrease in sales exacerbates the pressure on the contractors, whose sales on the free market fell by 57% compared to November last year, amounting to only 2,300 apartments. In the second-hand apartment market, the rate of decrease was only slightly greater - 58%. The chief economist's examination of the regions of the country shows that the rate of decline in apartment sales is higher the higher the average price of apartments in the same area. This figure is consistent with previous findings and estimates in the market that the main drop in sales is in the expensive apartment sector, and Netanya and Tel Aviv are at the top of the sales declines. In the housing sector, it is estimated that Tania stands out in the decline in sales due to a sharp decrease in the activity of foreign investors in purchasing apartments. Nazareth, where the average transaction price is about one million shekels, has maintained relative stability.
In the sale of new apartments, the sales in Tel Aviv fell by the sharpest rate - 77%, and in fact it is a stagnation, among other things because there are no affordable apartments in Tel Aviv, and the large projects in the north of the city, such as Sde Dov and Pi Galilot, are stuck in the local and national planning committees. However, apartment sales "on paper" reached a record high of 72%. The figure indicates that the contractors do not have a stock of apartments whose construction has been completed and which they have difficulty selling, and most of the apartments they sell have not yet been completed and some of them have not even started to actually be built.
The volume of investor purchases amounted to 1,300. Compared to the general market, investors retain a significant share of 16% of the market, but the economist notes that this is an 80% decrease compared to November 2021, which was distinguished by a jump in investor purchases against the background of the increase in the purchase tax for apartment investors. The investors sold 1,700 apartments, thus reducing the stock of apartments in their hands and the pool of apartments that can be rented on the market by 400.