(photo credit: Alejandra Goldenfen)
The Bank of Israel expects prices in the housing market to continue to rise fast
in the coming year, which may require the imposition of additional
“There is a significant probability that
housing prices would continue their rapid rate of increase in the coming year,”
the central bank said in the minutes from its meeting before the interest-rate
decision for February, which were published on Monday.
At the meeting on
January 24, all the participating members of the central-bank’s management
recommended that the Bank of Israel Governor Stanley Fischer increase its base
deposit interest rate by 25 basis points to 2.25 percent for February because of
a substantial expansion in economic activity and rising inflationary
Those at the meeting discussed the effects of the steps taken
so far by the Treasury and the Finance Ministry to influence housing
They concluded that the Bank of Israel would need to introduce
other macro-prudential measures if there was no change in the path of prices and
in the degree of leverage.
The acceleration in house prices was renewed
in December. Last year, house prices increased 17.3% as interest rates remained
low and the supply of houses fell short of demand.
The latest figures
relating to the October-November period showed a renewed acceleration in prices
and a marked increase in the volume of new housing loans with a significant
share at floating interest rates, the central bank said. The outstanding balance
of housing loans in November was 10% higher than that in December
The concerns raised in recent months by the Bank of Israel and the
Finance Ministry regarding the continued increase of housing prices were further
reinforced by the Government Assessor survey for the fourth quarter published on
The survey showed that the average price of a four-room apartment
rose 3.8% in the last quarter of 2010 compared with the previous quarter and
13.7% compared with the same quarter in 2009. Prices increased the most in
Hadera and Beersheba, rising 8% on average compared with the previous quarter. A
four-room apartment in Beersheba cost an average of NIS 675,000 in the fourth
quarter, compared with NIS 623,000 in the third quarter.
steady in Jerusalem and Nahariya in the fourth quarter. Eilat was the only city
where prices declined, down 4%.
Since the fourth quarter of 2008, prices
of four-room apartments have surged an average of 29.4%.
Assessor attributed the continued rise in property prices to the low supply in
available apartments, which stood at 13,500.
Although the Bank of Israel
raised the interest rate and imposed tightening conditions on mortgages in an
effort to lower demand for homes, strong economic indicators and continued
growth were accelerating demand, the report said.
“This survey and the
most recent data from the central bank and the Central Bureau of Statistics are
further proof that prices are continuing to rise, and they show that the Finance
Ministry is failing in its efforts to stem the surge in prices,” Association of
Contractors and Builders president Nissim Bublil said Monday. “The Treasury
needs to find immediate solutions to the shortage of supply in new housing
rather than trying to cool down the market by raising taxes.”