Real estate bubble bursting?

Third quarter sees fewer than 23,000 homes purchased, a 19% decline compared with Q3 2009 – lowest figure for this quarter since 2006

Reuters | Published: 11.24.10, 14:02

The number of real estate deals in the third quarter of 2010 plummeted by some 19% compared with the same period in 2009, a report issued by the State Revenue Administration and published by the Finance Ministry on Tuesday suggests.

Roughly 23,000 housing units (new and second hand) were sold in the third quarter, the lowest number for this quarter since 2006. This two-figure decline was seen in nearly all regions, both in relation to the previous quarter and in relation to the same period last year.

The second quarter of 2010 also saw a decline, albeit a smaller one, with a 2% drop compared with the same quarter last year. The sharpest decline was noted in the Rehovot region (32%), and Netanya region (26%), which also saw significant drops in the previous quarter.

The State Revenue Administration indicated that the Bank of Israel's interest rate hike in recent months, which aimed to make mortgages more expensive and reduce the demand for apartments, managed to put off those seeking to purchase an additional apartment for investment and contributed to the decline in demand.

Nearly all regions saw a decline of more than 20% in the purchase of apartments for investment. The most prominent decline was noted in Tel Aviv, the Sharon region and the Rehovot region, where a decline of some 40% was noted.