Israel's Housing Market Stalls, Developers Offer Major Financing Deals
Translated & summarized from Calcalist by baba
Israel's housing market is stagnant, with developers offering significant financing incentives to boost sales. In August, free-market apartment sales fell 5%, while government-subsidized sales and those with financing benefits increased. Developers' net cash flow from sales dropped 58% year-over-year, indicating financial strain. High interest rates are also leading nearly 30% of home traders to purchase less expensive properties.
The story in 5 lines · by baba
- Israel's housing market saw a 5% drop in free-market sales in August, with developers resorting to financing deals.
- New apartment sales by developers rose 6% year-over-year, boosted by government programs and financing incentives.
- Financing benefits were included in 30% of new free-market apartment contracts in August, a significant increase.
- Developers' net cash flow from new apartment sales plummeted 58% in August compared to last year.
- Nearly 30% of home traders purchased less expensive properties in August, indicating a trend of downsizing.
Israel's real estate market is experiencing a slowdown, with developers struggling to sell properties and resorting to significant financing incentives to attract buyers. August saw the lowest number of apartment sales since the early 2000s, excluding government-subsidized housing programs. In the free market, sales dropped by 5% compared to July and the previous August, with the second-hand market seeing a steeper decline of 6.5% and 11.7% respectively.
Developers, however, managed a relative increase in sales, selling 3,362 new apartments in August, up 6% from last year and 13.3% from July. This rise is attributed to two main factors: a 22% increase in sales through government housing programs like 'Price for Me' and 'Discounted Apartment,' which offer substantial discounts, and a dramatic return of financing deals. These government programs, which offer discounts of up to half a million shekels or more, accounted for 1,290 sales in August, with Haifa and Kiryat Gat being prominent cities for these transactions.
Financing incentives, previously curtailed by Bank of Israel restrictions, have made a comeback. In August, there was a 50% surge in new apartments sold with financing benefits compared to May. These benefits were included in 30% of free-market new apartment contracts for properties with delivery dates at least a year away, up from 27% in July and 20% in May. The Hadera region saw an exceptionally high rate of financing benefits, applied to 73% of such sales.
The difficulties faced by construction companies are also evident in their cash flow. Net cash flow from new apartment sales, after deducting expenses, plummeted by approximately 58% in August compared to the previous year, totaling only 418 million shekels. This sharp decline, with four companies accounting for 75% of the net cash flow, highlights the financial strain on developers.
Furthermore, high interest rates appear to be influencing homebuyers. In August, 29% of those who traded up for a new home purchased a less expensive property than the one they sold, a trend referred to as 'downsizing.' This suggests that nearly three out of ten home traders are opting for more affordable options, potentially to free up cash or reduce mortgage burdens.
