Jerusalem housing construction.
Jerusalem housing construction. Photo by Daniel Bar-On
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The Bank of Israel's Monetary Committee is concerned about the risk of rising home prices, the minutes of the panel's last interest-rate-setting meeting reveal.

The minutes, which summarize deliberations that took place September 23 and 24 and were published yesterday, show that committee members were concerned that the Israel Lands Administration was tendering land for development at an increasingly slower pace.

The committee, which is chaired by Bank of Israel Governor Stanley Fischer, noted that home prices over the last 12 months had been stable.

But, as the minutes made clear, members were concerned that the narrowing supply of new land for development was coming amid reawakening demand for homes - a trend made clear by a 4.6% increase in new mortgages in the 12 months through August.

"The change in home prices in the past month, the number of home purchase transactions, and new mortgages granted are a cause for concern over the possibility of renewed increases in home prices," the committee said.

It cited the property market as one of four factors that prompted it to keep the base rate unchanged at 2.25%.

In the 12 months through July, home prices rose 1%, but from June to July they increased 0.8% after showing no change at all from May to June, according to figures cited by the committee.)

In July, about 10,300 homes were purchased, an increase of 29% from July 2011. But the panel attributed at least part of the jump to expectations of an increase in the value added tax, which in the event rose one percentage point in September.

Looking at other aspects of the inflationary environment, the committee concluded that the economy continued to grow at a moderate pace in September.

A slowing world economy is likely to constrain exports even as the shekel has been depreciating against the dollar, the committee said.