The construction sector in Israel saw a moderate recovery in the first nine months of this year, but the business risk level of the sector still ranks among the highest in the developed world, according to the Business Data Israel business risk index.
"The business risk level of the construction sector in Israel is among the highest in the world," said Ayal Yanai, joint managing director at BDI. "The mixed trend in the sector, on the one hand, points to a recovery and rise in luxury apartment sales and increase in demand for apartments in the center and, on the other hand, there is a continuing drop of construction in the periphery."
The BDI business risk index for the construction sector, which looks at the financial situation of contractors, improved by 5 percent in the first nine months of this year from a level of 6.59 to a level of 6.3. Still, the three central parameters - low exchange rate, lower value-added tax and lower long-term mortgage interest rates - which were expected to have a positive impact on the construction sector in Israel - did not bring about significant improvement.
At the same time, the business risk level of the construction sector was about 7% higher than the average risk level of all companies and businesses. In addition, the average number of credit days in the sector increased by 15% in the first half of the year from 98 days to 113 days.
Looking ahead to 2007, economists at the BDI forecast an increase in the demand for apartments as new apartment constructions in the center expand. Over the next two years, contractors are expected to build 33,000 new residential apartment units. Furthermore, BDI economists foresee an increase in apartment prices as a result of the par between demand and supply and the continuing demand for apartments, which are mainly located in the center of the country.