Zero VAT program treasury Continues to influence sales The new apartments by contractors, although to a lesser extent compared to the previous month, according to data from the Central Bureau of Statistics relating to demand and sales of new apartments by contractors in June 2014.
According to the data, last June, 1,685 new apartments were sold, compared to 1,268 in the previous month (May 2014) and compared to 2,013 new apartments sold in the corresponding month last year (June 2013).
Thus, on the one hand, this is a significant increase in contractor sales compared to the previous month, an increase of approximately 30%, but at the same time a decrease of approximately 16% compared to the corresponding month last year. We note that despite the increase in the number of new apartments sold in June compared to the previous month, this is still a low number of new apartments sold in one month based on the monthly average in recent years.
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The industry explains the increase in the number of apartments sold in June by the fact that, although those who consider themselves eligible for the zero-rate VAT program are waiting, investors and home improvement developers are continuing to purchase apartments, including the stock of apartments that may later be eligible for the benefit. At the same time, it is not impossible that the low figures of previous months also led to sales and discounts on the part of Contractors Which may have increased the number of apartments sold in the month under review (June 2014) compared to the previous month.
Recall that the CBS data in the previous month (May 2014) showed a significant impact of the zero-rate VAT program on the industry, when 1318 apartments were sold, a decrease of approximately 20% in the number of new apartments sold compared to April 2014 and a drop of approximately 45% compared to May 2013, when the number of new apartments sold was 2416.
Alongside the data on the sale of new apartments by contractors, which, as mentioned, recorded a mixed trend compared to the previous month and the corresponding month, in other data presented today by the CBS, new apartments that are not for sale (Build Your Own Home, purchase groups, construction for rent and estimated illegal construction), a significant drop can be identified. Thus, in June 2014, this figure includes only 955 new apartments, the lowest figure in the last four years. This is a significant decrease of approximately 23% compared to the previous month, and a drop of approximately 47% compared to the corresponding month last year. This figure indicates a decrease in the activity of purchase groups and self-construction of single-family homes.
The CBS data also refers to demand for new apartments, a figure that combines the sale of new apartments by contractors plus new apartments that are not for sale, and this figure indicates a decrease of approximately 30% compared to the corresponding month last year, alongside an increase of approximately 5% compared to the previous month.
When broken down by district, there was an increase in new apartment sales in the vast majority of districts compared to the previous month, except in the Judea and Samaria district where a slight decrease was recorded. At the same time, compared to the corresponding month last year, a decrease was recorded in the Northern, Haifa, Central, Southern and Judea and Samaria districts. An increase was recorded in the Jerusalem and Tel Aviv districts. The most significant decrease in new apartment sales in June 2014 compared to June 2013 was recorded in the Southern District (38%) and the Northern District (36%), with the volume of sales in the Haifa and Central districts decreasing by 28.5% and 29% respectively. In Judea and Samaria, the volume of sales decreased by 25% during the aforementioned period.
Another interesting statistic that may explain the increase in new apartment sales in June 2014 compared to the previous month stems from data from project marketing companies regarding the characteristics of buyers who come to sales offices. Thus, according to data from the real estate marketing company Eldar, the market segment of home improvement buyers jumped in June to 56% compared to 35% in the corresponding period, while at the same time, the percentage of first-time home buyers fell in June to 12% compared to 36% last year. The percentage of investors registered a more negligible change and stood at 29% in June compared to 23% last year. Home improvement buyers and investors captured 85% of the market share of new apartment buyers in Israel in June.
According to Roni Cohen, CEO of Eldar Marketing: "In terms of the number of transactions, we are still seeing a certain decrease compared to the months before the announcement of the VAT plan and target price. However, in recent weeks we have seen young couples coming to the sales offices and marking the apartment they are planning for when the VAT law is passed, and home improvement companies rushing to close deals. I estimate that in the near future, given the difficulty in approving the VAT law, we will see a further increase in the purchase of new apartments.".
