Commentary: Home-prices figures are nonsense

A brief stroll among sales offices or the tent protests is enough to see that the market is frozen, and buyers again have the upper hand over sellers.

By DROR MARMOR/GLOBES
Apartment in Tel Aviv 311 (photo credit: Courtesy)
Apartment in Tel Aviv 311
(photo credit: Courtesy)
The extent to which we should believe this week’s contradictory housing figures released by the Central Bureau of Statistics and the Government Assessor is debatable. Both reports are based on data from the Israel Tax Authority’s real-estate-prices database, which relies on reports by home sellers. However, the recently published State Revenue Administration’s report for 2009-10 provides more than just a glimpse at the problems of this database.
The State Revenue Administration examined homes sold in 2002 and resold 2009, so it is reasonable to assume that the apartment size, number of rooms, floor in the building and its location remained constant. It found inconsistencies in 77 percent of the reports on apartment size between the two transactions; in 62% of the cases the discrepancy was at least 10 square meters.
There were discrepancies about the number of rooms in 31% of the reports – a fact that affects the nice tables (based on the number of rooms) in the statistics bureau’s housing figures. The apartment’s floor changed in 26% of the reports, and the number of floors in the building differed in 76%.
It is scary enough to think that these data are what the Central Bureau of Statistics and the Government Assessor use to calculate the average apartment price to an accuracy of a few thousand shekels.
But what is the alternative? The Finance Ministry has told us every month for the past 18 months that home prices have been falling – by comparing only new apartments sold from one month to the next in the same project.
The problem – beyond the fact that we all see how much these figures are divorced from reality – is that the Tax Authority reports that 4,748 new homes were sold in the second quarter of 2011, or just 22% of all realestate transactions.
Moreover, presumably the number of residential projects that can be used for comparative purposes for monthly sales are few in number, further reducing the already meager and dubious database on which the Finance Ministry relies.
The result is the repetition of a well-known scenario: Not only does no one know were we are going, no one even knows where we have been – a rather significant point considering the government’s wish (or lack thereof) to change direction.
On Monday, the Central Bureau of Statistics reported that the average apartment price had fallen by 2.2% in the second quarter from the preceding quarter. That was mostly due to a 3% drop in prices for large apartments, which was partly offset by higher prices for small apartments.
The average price for the middle-market 3.5- to four-room apartment edged down 0.8% to NIS 1.18 million.
The day before, the Government Assessor announced that home prices had actually risen by 1.6% in the second quarter. The figure is based on just 4,500 sales of fourroom apartments in 16 cities nationwide.
To sum up, we are left with the trends and intuitions on the ground. A brief stroll among sales offices or the tent protests is enough to see that the market is frozen, and buyers again have the upper hand over sellers.
That said, however, it is advisable to remember that we saw this movie two and a half years ago. Unless we exploit the opportunity to implement at least some of the solutions that have been suggested over the past six months – real solutions to boost the supply of land and apartments – we are liable once again to squander the calm before the storm hits again.