Recovery in Real Estate Amidst Market Shifts - February Transactions Show Promising Signs

In a report released today by the Chief Economist Division of the Ministry of Finance, February's real estate transactions depict a nuanced picture of recovery, particularly in the new apartment market. Despite challenges posed by the ongoing war, the data suggests a gradual rebound in certain segments of the housing sector.

According to the survey, a total of 7,511 apartments were purchased in February, marking a notable 19% increase compared to the same period last year. However, this figure represents a 7% decrease from the previous month. When excluding government subsidy sales, the number of transactions on the free market stands at 6,569 apartments, reflecting a 13% year-on-year increase yet a 7% month-on-month decline.

Contractor Sales Surge
A significant highlight of the report is the surge in contractor sales, with 3,644 new apartments sold in February – a remarkable 44% increase compared to last year. Deducting government subsidy sales, contractor sales on the free market reached 2,702 apartments, a notable 34% rise year-on-year. This surge represents one of the highest levels of contractor sales in the past two decades.

Regional Dynamics and Buyer Preferences
Geographically, the Beer Sheva area stands out for its robust contractor sales, particularly in cities like Netivot, which attracts a notable proportion of first-time home buyers. Additionally, purchases by young couples experienced a sharp increase of 37% compared to last year, indicating shifting preferences and market dynamics.

Investor purchases saw a modest 11% increase compared to last year, with foreign resident purchases totaling only 96 apartments in February – a 16% decrease from last year. Investor sales, however, decreased by 3% compared to the same period last year, contributing to a gradual decrease in investor-held inventory.

Insights into Market Trends
The report also sheds light on evolving market trends, including a decrease in the proportion of apartments sold "on paper" and a notable decline in the rate of housing downsizers. The Chief Economist's Division suggests that factors such as preferences for apartments with Mortgage Market Derivatives (MMD) or the mortgage freeze outlined by the Bank of Israel following the war may contribute to these shifts.

As the real estate market navigates through ongoing challenges, February's transactions offer encouraging signs of resilience and adaptability amidst changing economic and geopolitical landscapes.