The corona crisis shadows the real estate market: in Q2 a decrease of 27% in sold apartments

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by Ifi Reporter Category:Real Estate Oct 3, 2020

The corona crisis gave its signals on the real estate market in the second quarter of 2020: In April-June, 16,800 apartments were sold in the free market (ie apartments that were not subsidized by the state) - a decrease of 27% compared to the corresponding quarter last year. Published today (Sunday) the chief economist at the Ministry of Finance, Shira Greenberg. It should be noted that this is the sharpest quarterly decline rate since the second quarter of 2014 that stood in the shadow of waiting for a zero VAT plan and also the lowest level since the first quarter of 2003 that stood in the shadow of the recession and the second intifada.
Compared to the previous quarter, which in its last third was only affected by the corona plague, there was a 25% decline. In this way, the second quarter concludes three consecutive quarters of a decrease in the number of transactions in the free market and in general, both in comparison with each quarter compared with its predecessor and in comparison with the corresponding quarters in the previous year. Also in the generalization of sales with a government subsidy (price per occupant program), the number of transactions in the second quarter amounted to 19,500 apartments - the lowest level since the fourth quarter of 2011, which was overshadowed by the social protest.
Geographical segmentation found that the sharp decline in free market transactions encompassed all regions, when it was particularly pronounced in areas of demand in the center of the country, and to a lesser extent in the periphery. Thus, in the areas of Netanya, Tel Aviv and the center, there was a decrease in rates between 35% -32%, while in the Tel Aviv area the level of transactions reached its lowest level at least since the early 2000s. In other words, the level of transactions in the Tel Aviv area in the second quarter of this year was even lower than that recorded during the second intifada (14% lower than the level of transactions in the first quarter of 2003).
The Chief Economist Division mentions that in the previous two quarters there was an increase in the number of transactions in the Tel Aviv area, while at the national level, as in most areas, there was a continuum of decreases in the number of transactions starting in the fourth quarter last year. According to the Treasury, "these findings suggest that the initial impact of the crisis was at a higher intensity in the luxury market." According to the findings, when examining the "ranking" of the second quarter of this year in historical comparison (until 2002) it was found that the more expensive areas are closer to the lows, and the less expensive the areas, the farther they are from their lows.
The review examined the number of apartments purchased by first-time home buyers. According to the data, in the second quarter, young couples purchased 7,300 apartments in the free market (that is, minus purchases under government subsidies) - the lowest level at least since the beginning of the last decade. Compared to the corresponding quarter last year, these purchases decreased by 24%, while compared to the previous quarter, this is a decrease of 19%. If the purchase of apartments as part of a price per occupant is included, the total purchases of young couples in the second quarter were 10,100 apartments - a similar decrease. Historically speaking, this is the lowest level since the third quarter of 2014, which stood in the shadow of waiting for a zero VAT plan.
Compared to other market segments, the decline in young couples' purchases was less sharp than that of investors and housing improvers (declines of 32% and 28%, respectively). The Ministry of Finance notes that this is a surprising finding in light of the fact that the severe damage to employment in the economy as a result of the corona virus has largely been concentrated in the young population. For example, about 30% of all those who were sent to the IDF in March-April were aged 34-25, an age group that constitutes the bulk of the buyers of "first apartment". In addition, an analysis conducted by the economics department at the Treasury among buyers of "first apartment" Recent years (2019-2015) have shown that about a quarter of this population has been expended in the last months of March-April. However, it seems that in the second quarter the proportion of young people who were expelled to the IDF was reduced.
The Ministry of Finance examined the rate of singles among first-time home buyers in the second quarter, who were expelled from the IDF, compared to singles who purchased their first home in 2019. According to the data, 75% of these buyers were single, compared with 59% last year. Given the low wage levels of this population (NIS 5,200 gross per month per household) and the fact that the sole breadwinner (in the case of singles) was excluded, it can be assumed with high probability that the parents are behind these purchases (while 'saving' in purchase tax as an apartment Additional ').
A further survey was conducted among married couples who purchased their first apartment in the second quarter, when at least one of the spouses was evicted or fired in March-April, indicating that there was a lower dependence on the wages of the expatriate worker compared to young couples who bought an apartment last year. Payment at the outbreak of the crisis. However, the Treasury notes that "it is doubtful whether in retrospect, especially on the eve of the imposition of another closure, all of these households, certainly relatively weak among them, would make the same purchase decision as they did when leaving the first closure."
Investors' purchases in the second quarter amounted to only 2,300 apartments - a historic low in these purchases and a decrease of 32% compared to the corresponding quarter last year. The Treasury explains that it is likely that beyond the impact of the corona crisis, the level of slump in investors' purchases was affected by the wait for the purchase tax to be lowered. However, against the background of the current crisis, the impact of the tax cut is expected to be milder than in June 2015. A geographical segmentation found that the decline in investor purchases encompassed all regions, with almost all declining to its lowest historical level.
Investor sales in the second quarter amounted to 3,900 apartments - a sharp decrease of 26% compared to the corresponding quarter last year, similar to the rate of decrease in the total number of transactions in second-hand apartments. During the quarter, the increase in the rate of dwellings sold at a real capital loss continued, with these already accounting for 14% of total investor sales in the quarter, almost double compared to this rate last year. In the Be'er Sheva area, about one-fifth of sales were at a loss.

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