Property prices in Israel continue upward trend despite government plans to stem the rise
Posted on 19. Jan, 2010 by Buy-It In Israel Staff in Israel Real Estate
Growing efforts by the government to bring down rising property prices in Israel are not yet showing much success. Figures published by the Central Bureau of Statistics found that apartment prices rose by an average of 2.4 percent in November compared with October. The report shows that house prices in Israel have been on a steady increase in the 11 months since the beginning of 2009 rising by 17.4%. In October home prices went up by 2.2% compared with the previous month, while in September prices rose by 1.8% compared with August. A separate report by Finance Ministry showed that in November, the number of house purchases jumped by 16% after falling at an accumulative rate of 30% in the September- October period.
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Meanwhile, Housing and Construction Minister Ariel Attias has in recent months announced plans to help relieve the housing shortage in the Israel real estate market which has kept prices on a rising trend as demand, albeit at a slower pace, continues to outstrip supply. As part of these efforts, land tenders are offered to flood the market with an initial 6,533 apartments aimed at lowering prices. In addition, Attias announced at the end of last week that the ministry is planning to expand the homeowner program tailored for young couples and new immigrants. Under the framework of the program the housing ministry puts out tenders for developers who bid for projects on the basis of housing prices per square meter. In practice it means that the winner of the tender is the developer who submits the lowest price per square meter. As a result of this bidding process, apartment prices are 10% to 30% lower than in ordinary land tenders, according to the ministry. The location for the tenders under the program include Or Yehuda, Yavne, Elad, Modi’in, Ra’anana, and Jerusalem. In 2010. the ministry plans to offer 1,500-2,000 small apartments of up to 100 square meters under the program compared with 1,360 apartments in the previous year, and 1,178 units in 2008.
Contractors and developers in Israel have rebuffed forecasts by the Finance Ministry and the Housing Ministry that property prices will come down as a result of interest rates in Israel going up and programs to flood the market with thousands of housing units coupled with the government’s plan for land, planning and building reforms aimed at cutting bureaucracy and shortening procedure for construction permits.
Project developers building in the periphery and the center of the Israel reported that in the third quarter of 2009, demand for new homes moderated after peak demand in the second quarter, which was an exceptionally good quarter for home sales compared with previous quarters. In the fourth quarter demand remained high leading to an increase in prices. For example Z.M.H Hammerman, a developer of large-scale residential projects, in recent months raised prices of almost all of their projects by 1% month by month and by 3% in November in light of high demand for apartments and low supply.
Looking ahead to trends in the Israeli property market in 2010, developers and contractors expect housing prices to increase more moderately in the center of the country compared with the previous year and rise more in the periphery. Israel real estate agents and contractors project prices for residential housing to grow by an average of 10% to 15% this year as efforts by the government to cope with the shortage of supply will take a few years to have an impact. The areas, which have been pinpointed as areas for potential growth in property prices are Yavne, Kfar Yona and Moshav Matzliah. Furthermore developers expect the luxury housing market in Israel to pick up again in 2010 in light of a comeback trend of foreign resident buyers since the end of 2009.
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