Israel's real estate prices increased 4.6% in 2013, a similar rate to 2012, showing few signs of abating, according to a Justice Ministry's Land Assessment Division report released Sunday.
The study examined transactions of four-room apartments, which it said were the most commonly bought and sold in the real estate market, and best represented the overall market.
Tel Aviv remained the most expensive city, with the average four-room apartment costing NIS 2.747 million, followed by Herzliya at NIS 2.037 million and Jerusalem at NIS 1.758 million. From the last quarter of 2012 to the last quarter of 2013, Tel Aviv and Herzliya apartment prices jumped 10%.
"Tel Aviv enjoys excess demand, and the demand is rigid given the fact that the city is the most attractive in Israel," said Ran Ben Avraham, VP of Marketing at Tzemach Hammerman, an architecture firm. The city, he said, was a "limited edition," comparable to London, Paris and New York in that they are all desirable cities with limited housing supply.
Throughout 2013, none of the cities surveyed showed an overall drop in price, though Kfar Saba remained stable. Five cities showed priced drops from the previous quarter (Eilat, Kfar Saba, Modiin, Rishon Letzion, and Netanyah).
The cheapest apartments were in Beersheba, which at NIS 843,000 cost less than a third of their Tel Aviv counterparts, followed by NIS 934,000 in Eilat.
The study also mapped out what cities had the greatest variance in apartment prices, which indcated, to some extend, levels of inequality in the city. In that regard, Jerusalem had the highest variance, followed by Tel Aviv and Haifa. Modi'in and Kfar Saba had the lowest variance in apartment prices of the 16 cities examined.
"The data reflect a trend we are working hard to stop and reverse," Housing Minister Uri Ariel said in response the report. "The housing market is a complex market and I believe that the actions we have taken can bear fruit soon, so that we will begin to see a break in price increases toward the end of the year and the start of a drop throughout 2015."
Many of the programs the government is undertaking, the report noted, have yet to affect the market.
But Ariel had his critics as well.
Former Israel Land Authorities Chairman Micky Vardi, now Chairman of the Reality Investment Fund, said that while Ariel's plan to put government funds toward boosting the market were positive, regulation remained too burdensome and there was more work to be done.
The state, he said, "is not providing a solution for the cost of development, which is reaching enormous levels for housing units. Therefore, the state needs to make a decision in principal to give up a certain percentage of its revenues as a result of subsidizing the price of land."
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