High Earners Also Cancel Home Purchases Amid Developer Financing Deals in Israel

A recent investigation by the Israeli Ministry of Finance reveals that not only low-income buyers cancel real estate transactions, but also a significant portion of high earners. Approximately 20% of those who cancel home purchases for financial reasons earn around 60,000 shekels monthly, despite the average apartment price being about 1.7 million shekels. This challenges the assumption that cancellations are solely due to inability to afford mortgage payments.

The data shows a stark income divide among those canceling deals: about 40% earn up to 12,000 shekels per household monthly, aligning with expected financial difficulties. However, the surprising finding is that a fifth of cancelers earn substantially more, suggesting other factors at play. Economist Ben Na'im points out that while salaries are high, property prices are not excessively so, raising questions about the true cause of cancellations.

Ben Na'im suggests that the issue may not be difficulty in meeting payments but rather doubts about the economic viability of the purchase, especially when cancellation costs are low or nonexistent. This points to a key suspect: developers' financing schemes that allow buyers to enter deals with relatively low initial capital and defer large payments. Such arrangements might encourage buyers to back out if the investment no longer seems worthwhile.

This analysis highlights complexities in Israel's housing market, where both low and high earners ultimately cancel transactions, influenced by the structure of developer financing rather than just income constraints.