Homeowners Trading Up Face Dilemma in Slow Market
Translated & summarized from Bizportal by baba
Homeowners upgrading properties in Israel's central region are increasingly struggling to sell their existing homes before their tax benefit deadlines expire. New data reveals nearly a third of such sales in August involved properties still owned by sellers who had already bought new ones. This situation, exacerbated by a slow market, can lead to significant financial penalties if sales are not completed on time. The overall inventory of apartments awaiting sale is nearing a decade-high, suggesting a potential shift in bargaining power towards buyers.
The story in 5 lines · by baba
- Nearly one-third of central Israel's second-hand home sales in August were by owners who already bought a new property.
- Homeowners face losing significant tax benefits if they cannot sell their old homes by a set deadline.
- The total inventory of apartments awaiting sale reached 23,095 in August, near a 2011 record.
- Sales by movers-up in August dropped 27% compared to the previous year.
- The housing market's weakness may be shifting bargaining power to buyers.
Homeowners looking to upgrade their properties are facing significant challenges in Israel's sluggish housing market. These "movers-up" have already committed to purchasing a new home but are struggling to sell their current one, often under pressure to meet tax benefit deadlines. New data from Galit Ben Naim, Deputy Chief Economist at the Ministry of Finance, highlights this issue, particularly in the central region of Israel.
In August, nearly a third of second-hand apartment sales by movers-up in the central region involved properties still awaiting sale by their owners, a figure that rose from about a quarter in July. This contrasts with the Sharon and Shfela regions, where this category represented only 15%-17% of movers-up sales in August, suggesting greater pressure on sellers in the central area.
One example illustrates the predicament: a homeowner who bought a new apartment in late 2024 had 18 months to sell their previous home to retain tax benefits. Due to delays, they utilized an extension granted following Operation "Lion's Roar," pushing the deadline to August 31, 2026. The property was sold on the final day for 2.7 million shekels, but with a delivery date nearly a year later and most payment due then, mirroring developer financing schemes. This flexibility indicates sellers' willingness to compromise to secure a deal, though the exact price concessions are unclear.
Failure to complete the sale could result in losing tax benefits, potentially incurring purchase tax starting at 8% on the new home and losing capital gains tax exemption on the old one, amounting to hundreds of thousands of shekels.
Ben Naim's data shows that in the central region, about 7% of sellers in the "awaiting sale" category completed their transactions in the final days before their deadline, with roughly one-fifth of this group selling within the last three months. In contrast, the Shfela region saw about 4% selling in the final days and 7% in the last three months.
However, about 70% of these sales across examined regions occurred with at least a year remaining until the deadline, suggesting many sellers opted for earlier deals due to market uncertainty rather than waiting until the last moment. In a market where prices are stagnant or falling, delaying a sale carries more risk than in a rapidly appreciating market.
The total inventory of apartments awaiting sale reached 23,095 in August, nearing the 2011 peak. At the current pace of second-hand transactions, selling this entire inventory would theoretically take over five months. The overall second-hand market saw 4,170 sales in August, a 7% drop from the previous year, while movers-up purchases fell 27% to 1,616 units, indicating a significant supply of second-hand homes from owners committed to new purchases.
Some contracts explicitly mention tenants, with lease agreements included and transferable to the buyer, suggesting some owners treated their old homes as income-generating assets during the waiting period. The data implies that while many sellers are under time pressure, the extent to which this translates into price reductions remains unclear, but the balance of power may be shifting towards buyers who can afford to wait.
