Housing Starts Fell 13% in 2012

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Housing starts dropped 13% last year to 39,790 units, the Central Bureau of Statistics reported on Thursday.

However, the CBS also found that the fourth quarter might indicate a turnaround in the trend, with 11,200 units begun in the final three months, for a 6% increase over the same quarter in 2011.

Trend data confirmed a possible turnaround. The CBS said that after five consecutive quarters of declining housing starts averaging 5.1%, the number picked up by 1.8% in the last quarter.

The government has been concerned about rising housing prices, but has left the Bank of Israel to address the problem alone by constraining demand for housing by making it harder to get a mortgage.

Analysts and industry executives have said the only way to alleviate pressure on prices is to increase supply.

“You can’t use interest rates ... to solve the housing problem. The solution is more on the supply side, and the Bank of Israel can only influence demand,” Bank of Israel Governor Stanley Fischer said at a conference on Wednesday. “I don’t want to hurt the entire population in order to teach the politicians a lesson, but the government needs to contribute its part and we’ll do ours.”

The Bank of Israel has also forced banks to limit lending to builders, which Housing and Construction Minister Ariel Atias said Thursday was also weighing on the market. “We are capable of generating building starts for thousands more housing units every year if the relevant authorities would solve the problem of the credit crunch and give oxygen to the housing market,” he said.

By city, Tel Aviv saw the most starts in 2012, with a 27% increase to 3,840. Jerusalem took second place with 2,310 starts, almost no change from 2011. Beit Shemesh experienced the biggest jump, from 537 building starts in 2011 to 1,500 in 2012.

Rishon Letzion, Ashdod, Netanya and Yavneh all stood out with declines in starts between 2011 and 2012 ranging from 40% to 52%.

There were 37,010 homes completed in 2012 7.9% more than in 2011, which marked the largest annual number of housing completions in the past decade, according to the Housing and Construction Ministry. There was also an increase in the number of homes under construction at the end of 2012: 85,500 units, 3% higher than at the end of 2011.

The ministry pointed out that this was the most at the end of any given year in the past 14 years.

Housing construction in Israel is not keeping pace with demand, and ministers worry that the VAT exemption for first-time buyers will be counterproductive to lowering prices..Credit: AP

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