This is according to the Home Price Index published Wednesday evening by the Central Bureau of Statistics. In the past year, there has been an increase of 1.1 percent. By district, the sharpest increase was in the Tel Aviv District, at a rate of 2.2%. The average transaction in Tel Aviv was NIS 4.14 million, and in Beer Sheva it was NIS 1.23 million. In the Construction Cost Index, there was actually a slight decline.
By Nimrod Bosu, Nadlan Center
Home prices increased by a further 0.9 percent, according to the Home Price Index published Wednesday evening by the Central Bureau of Statistics (CBS). The price change arises from comparing the prices of transactions from February to March 2024 with those carried out from January to February 2024. Compared to the same period of last year (February to March 2023), this is an annual price increase of 1.1%.
While the increase in home prices may encourage developers, the data published this evening also include worrying news for them: an increase of 0.8 percent in the Consumer Price Index, bringing the annual inflation rate to 2.8 percent. The increase in inflation is expected to influence the Bank of Israel not to reduce the interest rate, which currently stands at 4.5 percent, and may even influence it to increase its prices.
Prices of new homes increased at a monthly rate of half a percent, but the annual index of new homes declined by about 1.6 percent.
A segmentation by district found that the newest rate of increase occurred in the Tel Aviv district, which includes Tel Aviv and Gush Dan cities, where prices increased by about 2.2 percent. In the Haifa district, prices increased by 1.7 percent, in the Jerusalem and Northern districts by 0.8 percent, and in the Southern district by 0.6 percent. Only the Central district saw a decline of about half a percent.
At the level of annual change, the Haifa District saw the sharpest price increase, at a rate of 4.6%. This is followed by the Southern District (4.3%), Jerusalem (1.9%), North (1.0%), and Tel Aviv (0.4%). In contrast, prices declined in the Central District (0.4%).
The average transaction price throughout Israel for the purchase of an apartment was NIS 2,233,000 million in the first quarter of 2024, an increase of 3.1% compared with the average price in the previous quarter – NIS 2.17 million.
Tel Aviv and Herzliya have the highest transaction prices
Of the 18 largest cities, Tel Aviv is, not surprisingly, the city with the highest average transaction price for the purchase of an apartment in the first quarter, at NIS 4.142 million. The second most expensive is Herzliya (NIS 3.744 million), followed by Ramat Gan (NIS 3.012 million), Kfar Saba (NIS 2.919 million) and Netanya (NIS 2.782 million). The lowest transaction price on average was recorded in Beer Sheva—NIS 1.234 million, followed by Haifa (NIS 1.566 million) and Ashkelon (NIS 1.71 million).
Monthly rents for tenants who renewed their leases increased by 2.3 percent, and for new tenants (apartments in the sample with tenant turnover), there was an increase of 2.2 percent.
A surprising decline in the Construction Costs Index
The Residential Construction Costs Index declined by 0.1 percent in April 2024, reaching 130.1 points from 130.2 points in the previous month (baseline: July 2011 = 100.0 points). This is a surprising figure considering the industry’s manpower shortage, which reportedly increases workers’ wages. Disruptions in the supply of building materials were also supposed to increase the price of building materials.
Since the beginning of the year, the Construction Costs Index has increased by 0.2 percent.
The possibility that we will see further interest rate cuts is receding
Dror Ohev Zion, CEO and owner of Dara Real Estate Marketing, said in response to the data, “In light of the last two indices and the expectation of high indices in the next two months as well, the chances that we will see additional interest rate cuts in the coming months are receding. The Home Price Index increased by 0.9 percent, which confirms our assessments since the beginning of the year of continued price increases in the housing market, where the pace of transactions has also been marked by a prolonged increase since the beginning of the year. In our assessment, even at the current interest rate level, the residential real estate market trend will continue to be characterized by high demand, relatively low supply, and upward prices. This trend will gain momentum over the course of the year.”
Einav Savinzer, Director of the Southern Region at Eldar Mortgages, said in response to the data, “The increase in the CPI for April was influenced by seasonal increases, such as the Passover holiday, in which every year there is an increase in public expenditure in various areas. This time, the increase in inflation was also affected by the increase in the minimum wage, which increased the costs of workers, and the strengthening of the Dollar and Euro, which also increased the costs of goods and raw materials. Although the rate of increase in the CPI since the beginning of the year is currently lower than the rate of last year, according to forecasts, the CPI readings for May and June are expected to be high this year due to the waves of price increases already announced this month by many factories and importers. The relatively high inflation ahead of the summer months will make it difficult for the Governor to lower the interest rate in the near future.”
“We can see that the real estate market is beginning to recover; in April, there was a significant increase in the number of transactions, both second-hand and new apartments, which increased by 20.6% compared to the same period last year. In addition, in April, there was an increase of about 28 percent in mortgage volume compared with the previous month, despite the Passover holidays. You can see a return to pre-war mortgage volumes.”
