Mortgages Down as Buyers Wait for VAT Law

Evidence is mounting that Israeli homebuyers are sitting on the fence, waiting for the passage of Yair Lapid's zero-VAT initiative.

Yaakov Levi ,

Tackling the housing crisis
Tackling the housing crisis
Flash 90

Israeli homebuyers are sitting on the fence, waiting for the passage of the zero-VAT initiative proposed by Finance Minister Yair Lapid – and the latest evidence of that fence-sitting was a sharp fall in the number of mortgages taken out by Israelis in September.

Israeli banks wrote NIS 3.9 billion in mortgages in September, compared to NIS 4.1 million in August, according to Bank of Israel statistics released Sunday. Experts attributed the fall to an increasing number of people waiting on home purchases, hoping that the Knesset will soon pass the bill proposed by Lapid that will suspend payment of the 18% value-added sales tax (VAT) for first-time purchasers of qualified homes.

According to experts, the falloff was even more dramatic than the numbers would indicate, because mortgage rates are currently at an all-time low, the result of several recent cuts in the prime interest rate by the Bank of Israel.

The NIS 3.9 billion was higher than the NIS 3.5 billion in mortgages written in September 2013, but according to experts, the 2013 figure was unusually low because most of the High Holidays – Rosh Hashana, Yom Kippur, and Sukkot – fell in that month, whereas the falloff this year was due to the reluctance of young couples to buy homes now, in the hope they will be able to snag a deal on a home at an 18% discount, if and when the Knesset passes the law to allow such homebuyers to deduct VAT from the cost of their homes.



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