beersheba real estate 311.
(photo credit: Courtesy)
There is no bubble in the local real-estate market, even though housing prices
are rising faster than rents, Bank of Israel Deputy Governor Zvi Eckstein said
“Housing prices in Israel and worldwide are characterized by a
long-term upward trend,” he said at the Israel Geographical Association’s annual
conference in Jerusalem. “This trend constitutes a financial risk when the
business cycle starts to turn bearish.”
Real-estate bubbles around the
world were characterized by a significant decoupling between housing prices and
rents,” he said. “At the moment, there is apparently no bubble in housing prices
in Israel, despite the beginning of a worrying trend of an increase in housing
prices at a faster pace than the increase in rent.”
Eckstein said the
Bank of Israel was taking steps to prevent such a situation. In recent months,
he said, the central bank has announced macroprudential measures to tighten
mortgage conditions to cool demand for housing until the housing supply
Eckstein said the limited supply of land for
residential construction was the main reason for the rise in
“While the Israel Lands Authority is the almost exclusive owner
of land in the country, it is involved in only 40 percent of residential
building initiatives,” he said. “Such dominance by the government in land
ownership is peculiar to Israel. The Israel Lands Authority’s lack of incentives
for business development is among the factors behind the upward pressure on
prices during recent months, alongside the low interest rate in the economy and
the increase in credit for mortgages.”
Significant sales of state lands
designated for building would increase competition and private business
initiative, thereby reducing land and housing prices, Eckstein said. The
immediate focus should be to provide tax breaks that would encourage more
construction, he said.
Housing prices increased 1.9% in the third quarter
and 19.7% over the past 12 months, according to the Central Bureau of
Statistics. The volume of new mortgages granted in October increased 11%
compared with September, to NIS 3.58 billion, according to the minutes of the
Bank of Israel’s discussions setting the interest rate for December, which was
There was an increase in all types of mortgages, with
the most prominent one, 27%, in CPI-indexed mortgages at floating interest
The housing component of the Consumer Price Index (based on
rentals) was the main inflationary factor over the past year, the minutes said.
Over the past 12 months the CPI increased 2.5%, while the index excluding
housing rose 1.4%.
“In light of the gap that has arisen between the
increase in house prices [19.7% in the 12 months to September] and the increase
in rentals [94.7% in the 12 months to October] rentals may continue to
increase,” the minutes said.
“The [rentals] housing component is the main
reason that inflation is expected to be above the midpoint of the target
inflation range in the coming year.”
Trend figures point to stabilization
in the volume of property transactions following a continued decline since the
third quarter of last year, the Finance Ministry said in its “Red Lights”
economic survey for October on Monday.
During October, 8,800 apartments
were bought, up 46% compared with September, which was the lowest level since
October 2008. The volume of home purchases in October was up 11% compared with
last October. In September and October the number of property deals declined by
an average of 8% compared with the same months last year.
fell 1% in October compared with September, Finance Ministry figures showed.