Home Prices Continue to Rise in Q1

Figures do not yet show impact of announced government reforms to reduce home prices, which caused significant upheaval in the real estate market.

Ofer Vaknin

Home prices increased by a nominal 1.5% in the first quarter of the year compared to the final quarter of 2013, reported the government appraiser in his quarterly report on home prices. The number of sales dropped.

Prices were up 5.2% versus the parallel quarter in 2013.

The figures are in nominal terms, which means they do not factor in inflation.

The report by Tal Aldroiti compares the prices of four-room apartments in 16 major cities.

Aldroiti noted that toward the end of the period under review, the government had made several significant announcements regarding intents to reduce home prices, including the “target price” plan to encourage contractors to build more cheaply and a plan to give some first-time buyers an exemption from value-add tax on new homes. This caused significant upheaval in the real estate market, he added.

“In March 2014, a 12% decrease was observed in the number of new home sales versus February. Yet because the decision by the housing cabinet was published only toward the end of the period under review, it is likely that it did not impact housing prices during that quarter.”

The comparison uses four-room apartments, which are considered a “common product with relatively little variance.” The report uses these transactions as an indicator regarding the housing market as a whole, notes Aldroiti.

According to the report, price increases were sharpest in Be’er Sheva, with home prices there up 13% versus the parallel quarter in 2013 and 5% versus the fourth quarter of 2013. The average four-room apartment cost 889,000 shekels in the first quarter of the year.

Another relatively steep increase was observed in Ashkelon, where prices were up 10% from the parallel quarter, to an average of 903,000 shekels. In Modi’in and Tel Aviv, prices were up about 8% versus the parallel, to 1.57 million shekels and 2.75 million shekels, respectively.

Housing prices did not drop over the past year in any of the cities surveyed.

Prices in Jerusalem remained stable versus the parallel period, at an average of 1.78 million shekels.

In Herzliya and Ramle, prices dropped by about 1% versus the final quarter of 2013, to 2 million shekels and 1.1 million shekels, respectively.

Prices have been increasing for seven years straight, sparking social protests and unrest.