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Rising home prices continue to increase hardship for buyers

January 7, 2014 23:13

Housing sales slumped 6% in October and November relative to the third quarter, though demand remained high.

Realtor Racheli Brizel says the company is very interested in building apartments for young couples

Tirat Carmel house 521. (photo credit:Adi Benzaken)

Home prices have risen a nominal 8.6 percent (6.7% in real terms) over the past 12 months, leading to a decline in Bank Hapoalim’s home buyer’s index. The index fell 0.8% in November to 124.3, a score set relative to 100 at the start of 1996. That figure is down nearly 8 points from a year earlier, representing a continued trend of increasing hardship for home buyers.

The index takes into account the price of housing, unemployment, average wages and the cost of monthly loan payments, as influenced by the average interest rate for mortgages.

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According to Bank Hapoalim, housing sales slumped 6% in October and November relative to the third quarter, though demand remained high.

Labor MK Itzik Shmuli on Tuesday accused the Bank of Israel of fueling high housing prices by keeping the interest rate low, making the market attractive for investors.

In response, Bank of Israel Governor Karnit Flug said the bank had installed new taxes and restrictions to make the market more accessible to new buyers and dampen the appeal of investors.

Despite the repercussions for the housing market, she said, the low interest rates were necessary to aid the overall economy.

“If we were to leave the interest rate high, the damage to the economy as a whole, to exports and to employment, would have been much more serious,” Flug said. “Therefore, the measures in the housing market are intended to reduce the effects of the interest rate on the risks in the housing market.”
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