Housing sales hit 20-year low
Special offers by real-estate developers in the closing days of December contributed to a small recovery in the number of deals in January, compared with November, but they did not change the overall picture.
The final quarter of 2023 was the worst for housing sales in the past 22 years, and 2023 was the worst year for sales in the past 30 years, according to a survey by the Finance Ministry’s chief economist.
In December, 6,088 homes were sold (including in government-subsidized projects), 15% fewer than in December 2022 but 47% more than in November 2023. December had the smallest decline compared with 2022 in recent months. Nevertheless, it was the weakest December for housing sales in Israel since the start of the century.
What stood out in December was the sales by development and building companies, which totaled 2,782 homes, 10% higher than the monthly average in the first eight months of 2023. Sales plunged from September onward with the High Holy Days and then the war.
This explains the optimism in the real-estate market. Nevertheless, the chief economist expressed a certain skepticism about this optimism and attributed it more to the aggressive marketing campaigns by the developers.
“Analysis of contractors’ sales in the free market over the month found that the highest relative number of deals were done on the last day of the month and of the entire year, December 31,” the survey found. “This finding is not surprising since it is known that real-estate developers, especially those traded on the stock exchange, have a high incentive to generate many deals just before the financial statements for that year are closed. This, in particular, is due to weakness in sales throughout 2023, especially after the outbreak of the war.”
A further look at the data showed that certain regions boosted the sales of developers on December 31. The central region led the sales of real-estate developers on the open market and the rise in sales, with 20% of the overall sales for December on the last day of the month.
Nationwide, 13% of sales were on the last day of the month. A large proportion of the apartments sold on the last day of the month were by the 10 biggest development and construction companies, which strengthens the notion that strenuous efforts were made to improve their financial performance in 2023.
A low point in real estate of historic proportions
In the central region, 90% of sales were in six cities: Petah Tikva, Kiryat
Ono, Ramat Gan, Givat Shmuel, Or Yehuda, and Bnei Brak, all of which recorded significant growth rates compared with December 2022.
“It should be noted that in each of these cities, which stand out in sales, there were major marketing campaigns by contractors, including easing payment conditions (some of them even require a payment of only 5% at the time of purchase and the balance upon delivery), non-linkage to the construction inputs index, etc.,” the chief economist wrote. “These campaigns are not reflected in the price levels themselves.”
The prices of apartments purchased in these cities were far from low: In Kiryat Ono, the average price of a new apartment purchased last December was about NIS 3.95 million; in Givat Shmuel, it was NIS 3.8m.; in Ramat Gan, it was NIS 3.5m.; in Petah Tikva, it was NIS 2.6m.; and in Bnei Brak, it was NIS 2.5m.
The salary of households that purchased an apartment in Bnei Brak was the lowest, NIS 10,900 per month, while the households that purchased an apartment in Givat Shmuel had the highest income, NIS 44,000 per month.
The marketing efforts toward the end of December improved the data for the month but did not change the bleak picture of the residential real-estate market. In the fourth quarter of 2023, 12,500 deals were completed, which was the lowest quarterly figure since the chief economist began reviewing the residential real-estate market in the early 2000s.
From that perspective, the Gaza war has contributed to an estimated decline of 33% in the volume of residential real-estate market deals, while the earlier high interest rates contributed to a decrease of about 40% in the volume. That means it is a situation of historic dimensions.
Last year, in which roughly 70,000 apartments were purchased, was the worst year since 2002. Based on partial data from the years preceding the start of the chief economist’s review, however, it appears that 2023 actually was one of the worst years since the First Lebanon War in 1982 and the hyperinflation of the 1980s. (Globes/TNS)