According to the CBS data for the month of July, the amount of new apartments that are purchased is in a steep decline. In the month of July, approximately 2,800 apartments were purchased, the lowest amount since October 2019, not including the months of March-May 2020, when the economy was subject to the first shutdown of the Corona virus. The data shows that the decrease in the purchase of new apartments is happening at a rapid rate of about 4% per month, and it started back in August of last year, long before the interest rate increases.
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It is impossible to exaggerate the steep decline in the purchase of new apartments, which has accompanied the industry for about a year. In fact, since 2007 I have not remembered such a steep rate of decline, as the current one, including the low recorded between the second half of 2015 and the end of 2018. The only question is, what causes this unusual low, and here several factors stand out:
The first factor is of course the rapidly rising interest rate, which is driving buyers out of the market. However, the interest rate increases are the result of the last few months, while the decrease in the number of transactions began already in the third quarter of last year.
Therefore, it can be estimated that the interest rate is a heavy contributor to a situation that is fundamentally caused by several other factors: a limited supply of apartments in areas of demand; Exhaustion of most of the transactions from the first generation of “Resident Price”, which were included in the 2018-2019 lotteries; the high level of prices, which does not allow many to purchase an apartment on the free market; and the decrease in the number of investors buying apartments in the market, due to the taxation imposed on them at the end of last year.
The city that led the purchase of apartments in the three months between May and July this year was Netanya, where 597 new apartments were purchased, followed by Tel Aviv where 590 apartments were purchased, Jerusalem (575), Ashkelon (471) and Lod (367).