How bold are Israelis when it comes to buying apartments on paper in these troubled times? A study by the Finance Ministry's Chief Economist attempts to answer this interesting question.
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The study analyzed sales by developers on the open market based on the apartment's expected handover date (as declared by the developer to the Israel Tax Authority). It found that in November, the rate of apartments sold with an immediate handover date remained at a low level of 2% out of the total number of apartments sold, as in the previous two months.
In this context, we should recall that in March-April 2020, during the first national lockdown, a sharp increase was seen in the rate of new apartments sold with an immediate handover date (concurrent with a sharp fall in the total number of new apartments sold). These deals constituted between 17% and 21% of the total number of new apartments sold – a finding that suggests that buyers were wary of buying apartments with a deferred occupancy date.
However, the rate of apartments sold on paper in November was 40% — two percentage points higher that in the previous month, and seven percentage points higher than the low point recorded in March, when the pandemic broke out.
In a geographic breakdown of on-paper apartment sales on the open market, we can clearly see that the higher the prices in the area are – the higher the percentage of apartments bought on paper.
In the Tel Aviv area, about 70% of new apartments sold on the open market in November were on paper – much higher than in any other area in the country. The average price of a new apartment sold on paper in Tel Aviv was NIS 3.7 million, which is also significantly higher than in other areas.
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Conversely, in the periphery – in the Negev and the Galilee – only slightly more than a quarter of new apartments on the open market are sold on paper. Possibly, the discount offered when selling such apartments – which is, of course, higher, money-wise, in more expensive areas – can explain the higher rate of sales on paper in these areas.
These findings probably also reflect differences in financial ability (even though most of the sum is usually paid at the date of occupancy).
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