Renegade Housing Report: Prices in Israel Rose 9% in Year

Property Appraisers Association report mimics government survey that finance minister has barred from publication.

Finance Minister Moshe Kahlon, March 30, 2016.
Finance Minister Moshe Kahlon, March 30, 2016. Ofer Vaknin

Finance Minister Moshe Kahlon tried to keep the bad news out of the public eye for as long as he could, but Tuesday his efforts were frustrated when the Property Appraisers Association reported that home prices had risen 9% in the third quarter from a year ago.

Kahlon, who has put reining in the soaring price of homes at the top of his agenda, two months ago barred Government Assessor Tal Alderotti from publishing his quarterly report on home prices, so the Property Assessors Association took up the cudgels and conducted its own study.

In fact the 9% year-on-year figure the association released was only slightly more than the Central Bureau of Statistics figure of 8.5%, the one Kahlon prefers to rely on. But the Government Assessor and the association do a more comprehensive survey based on home sales in Israel’s 16 largest cities.

“The public isn’t interested in a statistical average of prices in Eilat, Tel Aviv and Metula, as the CBS publishes. The property assessors’ index in a real measure and it’s a pity that the finance minister prevented the government assessor from showing the public the true picture,” said Ehud Hameiri, a property appraiser.

What the association’s index showed was that in many of Israel’s biggest property markets, home prices jumped at double-digit rates in the year. Tel Aviv lead the way, with a 17% increase to an average price of 3.158 million shekels ($820,000) for a four-room home.

Investors still big players
Homes bought by investors vs all purchases, '000s
Soaring home prices
Average price for a 4-room home in Tel Aviv

Ramle, which has attracted bargain hunters as prices in the most desirable locations have risen precipitously, saw prices increase 15% to 1.3 million. Rehovot also saw a 15% increase to 1.583 million and Rishon Lezion saw them climb 12% to 1.775 million.

In Jerusalem prices rose a more moderate 8% but they averaged 2.103 million shekels for a four-room property. Haifa saw the smallest rise – just 2% to an average of 1.41 million shekels.

Nationwide, homes prices rose 2.3% in the third quarter from the second, according to the report.

In a surprise move in August, Kahlon won the backing of Justice Minister Ayelet Shaked to block the quarterly report by the Government Assessor, which is part of the Justice Ministry. Kahlon argued that the government should be issuing only one figure for home prices.

Ohad Danos, chairman of the appraisers association, said the group tried as much as possible to use the same measuring tools to reach its estimate on home prices. “We consciously chose to even keep to the structure of the [government] survey with the goal of showing the public what’s really happening in the housing market,” he said.

The idea behind only surveying homes of four rooms, the mostly widely bought and sold property, is to create a uniform picture of home prices that reflects trends for homes of other sizes.

Kahlon has been trying to steady the housing market in part by increasing the supply through his Machir L’Mishtaken program, which tenders government land to contractors at a discount so long as they pass the savings on to home buyers. Kahlon is also hoping to reduce demand by imposing a tax on owners of three or more homes in the hope of encouraging them to sell or at least stop buying homes in competition with people who are buying homes to live in.

The multiple-homes tax has yet to be approved by the Knesset, but officials hoped that the threat of the tax would dampen investor enthusiasm. However, a report by Finance Ministry Chief Economist Yoel Naveh released Tuesday showed the threat was only partly effective.

It said property investors accounted for 19% of the approximately 9,500 homes purchased in September, unchanged as a proportion from recent months. However, they sold about 1,800 properties in the month, 200 more than they bought.

The news about home prices came as the Bank of Israel, in its monthly interest rate announcement Tuesday, signaled it was optimistic about the residential property market cooling off. Low interest rates have helped spur home-buying because they spell cheap mortgages.

“While home prices continue to rise, the stock of unsold new homes remains high, and some slowdown is apparent in monthly mortgage volume, with a continued increase in mortgage interest rates,” the bank said.