Government efforts to dampen enthusiasm for real estate investments seems to be finally having an effect, according to data from the Central Bureau of Statistics. A total of 22,700 new homes were sold in the first nine months of 2016, the CBS said, 8.3 percent fewer than were sold in the same period in 2015. Even more, sales in September totaled 3,240, 11.6 percent lower than in September 2015.
With that, some areas remained in high demand – in Yerushalayim and Tel Aviv, and especially in Beit Shemesh, where sales were up 121 percent. Other areas where demand was strong was Hadera, where sales were up 32 percent, and Rishon Letzion, where 24 percent more homes were sold in the period. In Be’er Sheva, sales were down 50 percent this year over last, and in Afula they were down 39 percent.
Finance Minister Moshe Kachlon has implemented numerous tactics to reduce the cost of housing, which has risen dramatically in recent years and has made even basic apartments out of reach for young couples. Kachlon’s latest idea is a proposed “third apartment tax,” in which owners of more than two properties would have to pay tens of thousands of shekels in a special surcharge. The hope is that the tax, as well as other programs, will dampen investors’ enthusiasm for Israeli real estate, allowing the market to calm down and for prices to moderate, if not fall, making homes more affordable to young couples.
According to the Finance Ministry, the law is already having the desired effect, even before going on the books; a total of 9,500 homes and apartments were bought and sold in August, 2 percent fewer than in July, which itself had 6 percent fewer sales than did June. Those were the months that discussion of the proposed tax in the media reached its peak, and as far as the Treasury is concerned, the figures indicate that investors are beginning to think twice about buying real estate. The only reason total sales of apartments were not off even more was because of the success of the marketing of “Price Investor” and “Price Target” projects in Rosh Ha’ayin and Kiryat Motzkin. Those projects allow contractors to build homes for general sale, while providing benefits when they reserve a percentage of the homes for sale to young couples, who can buy them at a discount, the Ministry said.
The tax, which is part of the Arrangements Law that accompanies the state budget, will kick in on January 1st. Under the law, landlords will pay a 1% tax per month on the assessed value of each home or apartment they own, beginning with the third property, up to a limit of NIS 1,500 per month, a total of NIS 18,000 a year. As the average value of homes in most cities is more than NIS 1.5 million, it is expected that most of the Israelis who will have to pay the tax will pay the full amount. The rule is expected to affect 50,000 people, who own a total of 180,000 homes. The value of the home will be determined by a government-certified assessor, based on home value data supplied by the Central Bureau of Statistics for each geographical area.