Finance Minister Moshe Kahlon.
(photo credit: MARC ISRAEL SELLEM)
The battle to halt the relentlessly increasing cost of housing showed few signs of success Sunday, as the government assessor reported that home prices increased 5 percent in the second quarter in comparison to the same period last year.
Meanwhile, economic growth slowed to an anemic annualized 0.3% in the second quarter, a serious slowdown to the country’s already moderate growth rate.
The housing prices, which grew an annualized 2.7% since the first quarter, looked at the average price of fourroom apartments in 16 cities.
The quarterly increases were highest in Herzliya (6%), Jerusalem (5%) and Netanya (5%), were more moderate in Tel Aviv and Ashdod (1%) and remained steady in Haifa and Holon.
Government Assessor Tal Alderotti said Israelis, unconvinced that prices will come down to earth anytime soon, have flooded back into the market, as seen in a significant uptick in home purchases.
The increase in prices comes as Finance Minister Moshe Kahlon battles to approve the 2015-2016 budget, replete with plans for increasing the supply of housing to make homes more affordable. Many of those plans, however, will take time to materially affect the market.
Following the release of the housing prices on Sunday, the Finance Ministry’s “housing war room,” a joint committee Kahlon set up to tackle the housing bureaucracy, announced plans to allow 5,000 new units through the fast-track “occupant’s price” program, which offers subsidies and discounts on apartments for various groups. The units will be in projects to be built in Karmiel, Upper Nazareth and Dimona. The ministry projected that work plans and sales for the projects would launch in the coming year and a half.
On the economic side of the equation, a 12.5% annualized fall in exports dragged down second-quarter growth, as did a 3.8% annualized drop in fixed investments and private and public consumption increases below 1%, according to data released by the Central Bureau of Statistics.
Taken together with the 2% annualized growth in the first quarter, Israel’s overall GDP increase amounted to an annualized 2.6%. Forecasters furiously slashed their estimates for the year’s overall growth.
“The weak growth figure is similar to the growth level during the quarter Operation Protective Edge took place, but this time there was no military operation,” said Ofer Klein, head of the economy and research division at Harel Finance, who cut his growth forecast for 2015 to 2.5% from 3.1%. The weak showing, he added, meant that an interest rate hike from the Bank of Israel was less likely, and the possibility of a cut was back on the table.
The strong shekel has made it tougher for Israeli exporters to sell their wares in international markets, as has weak economic performance in crucial markets such as Europe. On Friday, Eurostat showed that growth in the eurozone was also 0.3%, short of expectations, but ahead of the zero growth the zone exhibited in the last quarter.
As always, the CBS warned that Sunday’s figures were first estimates, and would likely change somewhat as more data came in.