Israel: home purchases by foreign residents in Israel hit 11 year low.

It seems diaspora Jews are more concerned with the security situation in Israel than they are about the security in their own countries. The number of homes being purchased by foreign residents is extremely low.

Some people imagined that the people in the Jewish community who chose to move to Israel would be buying real estate as soon as they arrived. As it turns out, that’s not quite what happened. According to real estate agents and contractors, the recent wave of anti-Semitic attacks in France and Australia (among other places) has sparked renewed interest in housing in Israel. But according to a report recently published by the Ministry of Finance, the number of houses bought by foreign residents in 2014 was the lowest it’s been in recent years. And the first figures for the year 2015 don’t show any increase in sales either. It appears that even though there appears to be a worldwide spike in anti-Semitic sentiment, Diaspora Jews are more worried about the security situation in Israel than they about what they could experience in their own countries.

The Ministry of Finance’s Chief Economist Department further released figures from a survey that shows that in 2014 the price of housing purchased by foreign residents had dropped significantly, in certain areas to a level close to the price of the real estate bought by Israelis. This is marks a change in a long trend of foreign residents purchasing more expensive housing than Israelis, meaning that the two distinct groups weren’t in competition with each other for the supply of available housing.

According to government figures, 27,000 housing units were purchased by foreign residents in 2014, 820 of which were bought in Q4. This is a 15% drop compared to the number of properties bought in 2013. The Ministry of Finance also noted that the number of housing units purchased by foreign residents in 2014 was the lowest since 2003, and offered two possible explanations for the drop in sales. One is that starting in 2014, foreign residents had to start paying a tax on the housing they buy that they had not been required to pay before. According to the Ministry of Finance, this also explains the change in the pricing of the housing purchased by foreign residents. The other explanation is the issue of the security situation. From July to August 2014, the war (coined “Operation Protective Edge”) took place in Israel, which also affected foreign residents. According to real estate agents that had been doing business with overseas buyers, instability in security situations greatly affects foreign residents, often leading them to try to sell the real estate they own, even at a discounted price.

The government also emphasized the fact that security issues affect the housing purchasing habits of foreign residents, a good example of which is the city of Tel Aviv. The number of housing units in Tel Aviv that were purchased by foreign residents dropped by 32% during Operation Cast Lead in 2009, by 27% during Operation Pillar of Defense in 2012, and by 25% during Operation Protective Edge in 2014. However, the government survey also noted that the foreign residents who’s purchasing habits were affected by the war quickly went back to buying housing once the security concerns were no longer an issue. Tel Aviv housing sales went up 74% in the quarter that followed Operation Cast Lead, up 17% following Operation Pillar of Defense and a massive 85% after Operation Protective Edge. The government survey showed that the situation was similar in other cities, although the numbers proved to be less extreme.

The survey figures indicate a recovery in housing sales after Operation Protective Edge, and as long as the security situation remains stable, the issue that still affects foreign residents is the issue of taxation. According to the Ministry of Finance, heavier taxation is one of the main reasons for the decrease in the number of sales, and is also a reason for the drop in the prices of the housing units that had been purchased. If there is to be a steady flow of purchases by Diaspora Jews and foreign investors in 2015, it is more than likely going to influence the supply of existing housing units more than it did in recent years.