Housing Prices in Israel Continue to Rise in Third Quarter

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Housing in Rishon Letzion (illustrative).Credit: Ofer Vaknin

Are home prices rising or falling?

Last week the Construction and Housing Ministry reported that they had turned lower in the third quarter, but yesterday the Justice Ministry’s Chief Government Assessors Department said they continued to climb — and sharply — in that three-month period.

The assessor said prices rose 1.4% in the July-September period from the previous three months and were up 6% from the third quarter of 2014. Not all of the 16 cities covered in the appraisers’ survey showed rises: Tel Aviv, Ramle and Rehovot all showed quarterly declines of up to 2% and Jerusalem prices plunged 7%, but they were exceptions.

“We saw a very confusing quarter. The public is looking for direction, so in some cities we saw declines and other cities we saw rises,” chief government assessor Tal Alderoti told Army Radio.

Rising home prices are a key challenge for the government, which has been trying to contain them through a variety of measures, from accelerated-building programs to limits on mortgage borrowing.

Last week’s Housing Ministry report found that prices for new homes declined 6% in the quarter while those for secondhand homes at dropped 4.3%. Alderoti attributed the discrepancy to differing survey methods.

“We’re examining at the same trends, both the Housing Minstry and I. They’re the same numbers but the question is what specific numbers you look at,” he explained. “We examine only four-room homes in the big central cities, where there is a lot of data to look at. The Housing Ministry looks at other data and their results are slightly different.”

Among the 16 cities surveyed by the assessors department, Ashkelon showed the biggest quarter-on-quarter rise, at 5%. Eilat, Ashdod, Be’er Sheva, Holon and Kfar Sava were next with increases of 4%. In Tel Aviv and Rehovot, by contrast, prices fell 2% and in Ramle they were down 4%.

Although Jerusalem’s 7% drop was by far the biggest quarter-on-quarter decline — and a 4% drop from a year ago — the decline wasn’t indicative of a trend. The assessor’s survey found that prices in the capital rose in the first half of the year to a record average of 2 million shekels ($510,000) for a four-room unit. In the third quarter, the price fell to an average of 1.87 million shekels.

In Tel Aviv, however, the third quarter extended a trend of declining prices since they peaked at 2.77 million shekels in second-quarter 2014. In the third quarter, the average price of a four-room unit in the city was 2.7 million shekels, although that was still 6% higher than at the start of 2013.

Haifa, Israel’s third-largest city, has seen prices rise in the last year. In the third quarter they increased 3% from the second and were up 8% from a year earlier, confirming a trend in place since the start of 2014. Still, a four-home home in Haifa is still inexpensive, averaging just 1.38 million shekels in the third quarter, up from 1.21 million shekels at the start of 2013.

Be’er Sheva’s home prices rose 4% quarter on quarter and were up 19% year-on-year, in the latter case by far the biggest increase among the 16 cities. But homes remain cheap, with a four-room unit costing an average of 1 million shekels, versus 788,000 shekels at the start of 2013, according to the assessor.

The assessor said the number of home sales fell in the third quarter from the second. Alderoti said the decline didn’t reflect market trends and reflected a surge of transactions in the second quarter before the government raised the purchase tax on homes bought for investment purposes.

He also attributed the decline to “fence-sitting” by first-time buyers waiting for government programs to lower prices, and to the High Holy Days in September and October.

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