Housing Ministry: Israeli Home Prices Rose 9.1% in 12 Months, Outpacing Increase in Salaries

Home prices are still increasing, according to the latest survey to be published on the matter. Home prices increased 9.1% in the 12 months between March 2012 and February 2013 after adjusting for inflation, according to the information and economic analysis division of the Housing and Construction Ministry.

The median price of a new home sold in the first quarter of 2013 – January through March – was NIS 1.38 million, according to the ministry's data. This is 7% more than the figure for the first quarter of 2012. After adjusting for inflation over that period, the figure is still 5.5% more than for the parallel period in 2012.

The average home price is 9% higher than the median figure for that period, and was NIS 1.5 million.

The median price of a second-hand apartment was NIS 1 million for the first quarter of the year, which is 11% higher than in the parallel period in 2012, and 9.6% higher after adjusting for inflation.

The average price of second-hand apartments sold in the first quarter also was higher than the median price, at NIS 1.13 million.

The increase in home prices is still outpacing the increase in salaries, according to the figures. It took the equivalent of 135 monthly salaries to buy a home in the first quarter of 2013, up from 129 in the parallel quarter of 2012.

The researchers state that the increase in prices is being driven by demand that exceeds supply.

"Looking at demographic trends versus the number of homes being added to the nation's supply since 1995 indicates a demand-side gap stemming from the growth in the number of households," the report states. "In total, there are an estimated 100,000 more households than homes," it states. "This is an estimate of the extent to which the country lacks homes."

Vered Zarfati, CEO of contracting company Zarfati Shimon, stated in response that the figures were no surprise.

"The price increases could be expected because we've had several months of reduced building starts," she said. "In addition, despite the fact that in 2012 the Housing Ministry and the Israel Lands Administration picked up the pace at which they sold land for construction, some 15% of land tenders were canceled or failed.

"Ultimately, the number of housing units sold by the ILA [last year] was the lowest figure seen since 2008. Most of the tenders were not in in-demand areas and thus cannot influence the apartment supply in the center of the country," she said.

Israel's skyrocketing housing prices have been a hot-button issue for years. Last week, the cabinet's housing committee approved a package of reforms, including setting targets for planning approvals of 80,000 new homes annually and land sales for at least 25,000 units.

In addition, the latest national master plan in the work calls for increasing construction within the center of the country, as opposed to the periphery, as in previous plans.