BoI: Housing price rise slows

Housing prices increased by 14% over the 12- month period ending in April, marking a slowdown from the 20% rise recorded for 2010 as a whole.

June 15, 2011 06:21
1 minute read.
Housing in the Galilee.

galilee housing 248. (photo credit: Courtesy)

Housing prices increased by 14 percent over the 12- month period ending in April, marking a slowdown from the 20% rise recorded for 2010 as a whole, the Bank of Israel reported Tuesday.

“Demand for apartments and activity in the construction industry continued to grow,” the bank said in its Survey of Recent Economic Developments covering January- April 2011. “The steps taken to reduce the demand and increase the supply of houses have still not made a sufficient impact, and house prices continued to increase rapidly, although at a slower pace than in 2010.”

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The rise in the benchmark interest rate, which currently stands at 3.25%, “has reduced the demand for apartments for investment purposes,” the central bank said. The number of mortgages increased, apartment prices rose faster than rental prices, and a shortage of skilled labor led to a drop in housing completions, it added.

The survey was published the day after the Finance Ministry released data that showed new-home prices had actually dropped 0.8% in April compared to the previous month.

From a macro perspective the Israeli economy had continued to grow in the review period, the central bank said, noting that investment, private consumption, imports and exports all grew rapidly.

“Inflation exceeded the [1%-3%] target rate throughout the review period, particularly due to prices of housing, transportation and food,” it said, adding that inflation expectations, while also high, are coming down to the target ceiling following the 50-basis-point interest- rate hike in April.

Similar to the Finance Ministry’s warnings on Monday, the Bank of Israel also emphasized problems in the United States and European Union.

“The US economy grew at a slower rate,” it said. “The difficulties in the employment market continued, and no solution seems in sight for the burgeoning budgetary deficit. The debt crisis in European countries continued to cloud the European recovery.”

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