General view of Tel Aviv.
(photo credit: REUTERS)
In signs that the troubled residential real-estate market is not healing, housing starts hit a two-year low in the second quarter of 2014, according to figures the Central Bureau of Statistics released Sunday.
From April to June of 2014, just 9,311 new starts were recorded, down 19.3 percent from the previous quarter and 13.8% from the same period the previous year. With the exception of the third quarter in 2012, when 9,006 starts were registered, the figures represent the lowest number of housing starts since the second quarter of 2009.
Housing supply in Israel has failed to keep up with growing demand, spurred by healthy population growth and rock-bottom interest rates on mortgages.
As a result, the price of housing has soared in recent years, doubling since 2007 and playing a central role in costof- living street protests in 2011.
The Bank of Israel estimates that to keep up with demand, at least 40,000 new housing units would have to come onto the market every year. In the first half of 2014, 19,829 units were completed, down 7% from the same period the previous year.
One possible reason for the drop-off in starts is anticipation of Finance Minister Yair Lapid’s 0%-VAT plan, which would give a heavy discount to some young couples on new-home purchases.
The policy’s fate is uncertain, but many young couples are putting off buying homes in hopes of securing the discount, should it come into effect.
New-home purchases by young couples dropped 30% in the second quarter, when overall real-estate transactions declined 14%. Alongside the effects of a slowing economy and the war with Hamas this summer, several major real-estate companies, including Z. Landau and U. Dori, are having a hard time, which would partly explain the decline in housing starts.
“A deferral of Israel Lands Authority tenders due to Operation Protective Edge, a closure that prevented the entrance of Palestinian workers, the shutdown of construction sites in the South due to the fighting and the uncertainty related to the application of a zero-VAT rate on new homes can all possibly negatively impact the increase in supply of homes,” the Bank of Israel’s monetary committee wrote in its recent interest-rate decision.
Compared with the first half of 2013, housing starts for the first half of this year fell 20% in Tel Aviv, 17.3% in the Southern district, 8.3% in the Haifa district and 6.5% in the Central district.
Housing starts increased 15.9% in Jerusalem but just 0.5% in the North. New construction in Judea and Samaria fell 71.9%.