Statisticians contradict BoI on impact of housing finance deals

The war of words between the Central Bureau of Statistics, and the Bank of Israel and Ministry of Finance is intensifying over the impact on the real estate market and housing prices of the special 20/80 buy now pay later financial offers by housing developers.

Dano Ben-Hur, senior advisor to the National Statistician at the Central Bureau of Statistics has warned that these special offers have had a minimal impact on the market, and if they were now weighted in the index, they would contribute to an increase in the housing price index.

Ben-Hur, who spoke at the annual conference of the Magdilim urban renewal website in Jerusalem, presented the Central Bureau of Statistics data on the issue, and claimed that the Bank of Israel and the Ministry of Finance have presented misleading information regarding the impact of these offers on the housing price index.

Ben-Hur cited discrepancies stemming from different definitions of the housing market. For example, he says, the Bank of Israel refers to all mortgage holders, including buyers of second-hand homes. The Ministry of Finance only analyzes transactions of new apartments, excluding apartments sold in subsidized programs, apartments delivered in less than a year, and apartments purchased with consumer benefits. In addition, the Ministry of Finance data includes only five out of ten tax regions in Israel.

The result – while the Chief Economist at the Ministry of Finance and the Bank of Israel estimate the number of deals carried out as part of the 20/80 offers at about 50% of all transactions carried out in the free market, the Central Bureau of Statistics estimates them at 14% of all new apartment purchases.

It should be noted that attempts made by Globes to reconcile the data were unsuccessful, and gaps still remain between them, even after deducting subsidized apartments.

Ministry of Finance and Bank of Israel believe that the Central Bureau of Statistics is underestimating the 20/80 offers.

Based on data from the Israel Tax Authority, the Central Bureau of Statistics has presented two main findings: The average length of time between the date of the transaction and the date of occupancy is 3.2 years. The most common financing benefit is the 20/80 model. The Central Bureau of Statistics estimates the impact of the financing operations using a discount model developed at Reichman University (Fair Value Forum). For example: an 20/80 financing benefit, with delivery in three years, is equivalent to a discount of 6.4%. An 15/85 financing benefit is equivalent to a discount of 7%.

Ben-Hur also presented an analysis of data over the last three years, which showed that the new apartment price index increased by 21.8%, without weighting in the 20/80 discounts. When the benefits are weighted in, the increase is reduced to only 20.5%. Thus the gap of only 1.3% is due to the fact that the proportion of apartments sold with financing benefits is low in relation to all apartments in the index.

In conclusion, Ben-Hur clarifies that the ongoing weighting of financing operations in the index is methodologically incorrect. According to him, if an adjustment is made to the index now, just after financing operations have been reduced by the Bank of Israel, the result will be an increase in the price index, and not a decrease, as certain sources claim. He says, “The apartment price index will continue to increase. Don’t blame the messenger, I also want prices to decrease. My son also wants to purchase an apartment,” said Ben-Hur.

On the other hand, sources at the Ministry of Finance and the Bank of Israel still believe that the Central Bureau of Statistics is underestimating these operations and their impact on the market, including a trend that has been prominent in recent times, in which buyers prefer to purchase new apartments in financing operations, rather than buying second-hand apartments.

“Globes” has also learned that in the first months of reporting by developers to the Tax Authority, some did not even report apartments they sold in financing operations, because they did not pay attention to the reporting obligation.

The Bank of Israel insists it is not part of any dispute, since the data base in their hands is different from that of the Central Bureau of Statistics and the Ministry of Finance. While the latter are based on reports from developers to the Tax Authority, the Bank of Israel is based on reports submitted to it by the banks.

However, the Bank of Israel’s data regarding the scope of financing operations are similar (but not identical) to those of the Ministry of Finance.

In its summary report for 2024, the Bank of Israel noted that the prices of new apartments rose by 4.1% last year, “and due to the financing benefits provided to buyers, their reported prices may be biased upwards.”

Published by Globes, Israel business news – en.globes.co.il – on April 2, 2025.

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