construction tel aviv 311.
(photo credit: Ariel Jerozolimski)
Prices in the housing market are expected to continue to rise over the next 12
months, albeit at a slower pace, according to the Bank of Israel.
prices continue to rise very rapidly, and did so in April, too, and if this rate
persists, it will distance them from the level consistent with the economic
fundamentals,” according to minutes from the central bank’s interest- rate
decision meeting for August that were released on Monday.
econometric equation, for forecasting changes in house prices, gives the result
that the rate of increase in house prices is expected to moderate in the next 12
The Bank of Israel raised interest rates for August by a quarter
percentage point, to 1.75 percent, at the end of July. One of the reasons for
the rate hike, which was unanimously supported by central bank officials at the
meeting held on July 26, was that housing prices and the housing index (rents)
are continuing to increase rapidly, together with a rapid expansion of housing
Based on a survey by the Central Bureau of Statistics, housing
prices increased in April by 1.2%, and in the 12 months to April inclusive by
21%, due to both the low rate of interest and to the slow response of the supply
of houses to higher prices.
Bank of Israel officials raised concern over
the rise of 21% in house prices in the 12 months to May and the continued
increase in mortgage credit.
They cited a need for macroprudential
measures in light of the increase in house purchases for investment purposes and
the high share of mortgage credit at floating interest rates. The central bank’s
supervisor of banks, Rony Hizkiyahu, sent a directive to the country’s banks,
which went into effect at the beginning of July, requiring banks to increase
their reserve provisions for housing loans given with high loan-to-value
The number of mortgages granted in the first half of 2010 was 52%
higher than in the first half of 2009, which can also be attributed to the rise
in house prices, according to the central bank. Central bank participants at the
meeting suggested that the increase in new mortgages in the past few months may
have resulted from buyers preempting the new directive by bringing forward their
The share of unindexed floating-rate mortgages in new
mortgages fell again in June, following its decline in May, but it is still
high, at about 50%. Most of the participants thought it best to wait till the
effects of the steps already taken have been further evaluated before
introducing other macro-prudential measures.
Property prices have been
slowing down moderately over the past couple of months after sharp increases
over the past year, according to a report by the government assessor in the
Justice Ministry published on Sunday. Prices of four-room apartments rose by an
average of 3.2% in the second quarter, while a year-on-year comparison showed
that prices surged by an average of 17.2% between June 2009 and June
The report was based on a sample of 4,700 purchases of apartments
in 16 cities in the first and second quarters of 2010.
comparison showed the sharpest price surge in Tel Aviv, where the average price
of a four-room apartment rose 32%, to NIS 2.31 million, in the second quarter
from NIS 1.76m. in the corresponding quarter last year. In the second quarter of
this year, though, prices were up by 2% from the previous quarter.
Herzliya, the average price of a four-room apartment rose 14%, to NIS 1.65m., in
the second quarter from NIS 1.44m. in the same quarter last year. In the capital
the average price of a four-room apartment increased by 19%, to NIS 1.62m., in
the second quarter from NIS 1.35m. in the corresponding quarter in
Over the past year there was also a sharp rise in property prices
outside the Central region. In Haifa, the average price of a four-room apartment
rose by 20% in the second quarter, to NIS 985,000, compared with NIS 823,000 a
year ago. Prices in Haifa increased by 8% in the three months to June this year
compared with the previous quarter. In Beersheba, the average price of a
four-room apartment surged by 23% year-on-year to NIS 626,000, from NIS
The government assessor’s report attributed much of the
continued price hikes in the housing market to the low supply of new apartments