Israelis now need fewer monthly salaries to pay for a home
Bank of Israel projects slight decline in demand for new housing in coming years.
The number of paychecks the average Israeli needs to buy a home fell to 127 in the first quarter from 134 a year earlier, the Housing and Construction Ministry announced last week.
Meanwhile, the Bank of Israel announced that, based on demographic projections and the pace of construction, the demand for new housing will actually decline in the coming years.
The number of monthly salaries it takes to buy a home is a popular international gauge. The improvement in Israel began in the middle of last year, mainly due to a modest decline in residential real estate prices.
According to the Housing Ministry, that trend stemmed in part from an increased supply of residential land and an increase in the number of homes under construction to the highest level since 1999. There were also more housing starts last year - 45,000.
The number of salaries needed to purchase a five-room home in the first quarter this year declined to 178 from 190 a year earlier - so homebuyers need an entire year less to pay off a mortgage.
"The increase in the supply of land is producing results, reducing prices and beating demand," said Housing and Construction Minister Ariel Atias. "We will continue this policy all the more forcefully; this will further decrease the number of salaries needed to buy a home in Israel."
The Bank of Israel says that in 2010, 40,000 new housing units were needed, a number that will fall to between 35,000 and 36,000 by 2019. The bank says the large number of unoccupied housing units compensated for the gap between the number of housing starts and demographic trends. Over the past decade, there were 10,000 to 13,000 fewer housing starts than needed each year.
A relative dearth of housing between 2005 to 2007 pushed prices up; by 2011, the shortage grew to an estimated 30,000. But the gap between housing starts and the need for housing narrowed substantially in 2010 after the state began issuing more construction permits.
The central bank does not think demand for housing will grow despite the government's policy to increase the pace of housing starts. Harel Locker, the director general of the Prime Minister's Office, says the government hopes to approve 60,000 housing units this year. If the housing supply continues to increase, of course, prospects increase for a halt to rising housing prices.