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

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A Ministry of Finance study shows that both low and high-income Israelis cancel home purchases, with high earners affected by developer financing schemes allowing low upfront payments and deferred costs, raising doubts about the economic viability of deals despite average apartment prices of 1.7 million shekels.

הידיעה ב-6 שורות · תקציר של baba

20% of home purchase cancellations come from buyers earning about 60,000 shekels monthly.
40% of cancellations are from households earning up to 12,000 shekels monthly, fitting expected financial struggles.
Average canceled apartment price is around 1.7 million shekels, not excessively high.
Economist Ben Na'im questions why high earners cancel if prices and payments are manageable.
Developer financing schemes enabling low down payments and deferred costs may encourage cancellations.
Cancellation costs are often low or nonexistent, reducing buyer commitment.

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.

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