Israeli Home Prices Rise Sharply Again in First Quarter

Gov’t appraiser reports 1.6% increase, bringing year-on-year rise to 8% - despite treasury’s efforts to stem rise.

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The Hakramim (Vineyards) neighborhood in Modi'in
The Hakramim (Vineyards) neighborhood in Modi'in. Home prices in the central Israel city rose 4% in the first quarter of 2016.Credit: Gil Cohen Magen

Israeli home prices continued rising sharply in the first quarter, despite Finance Minister Moshe Kahlon’s efforts to stem the increases, the Government Appraiser’s Office said in a survey released on Sunday.

Prices rose 8% in the 12 months through the end of March and 1.6% in the first quarter of 2016, said the government appraiser, which, unlike the Central Bureau of Statistics, only surveys four-room homes to get a better sense of market trends.

The figures from the appraiser gave little evidence one way or the other about whether the price rises that have been underway since 2009 are showing any sign of slowing. The increase was much slower than the 2.5% rise in the fourth quarter of last year, but previous quarters have ranged from as low as 1% to as much as 2.7%, showing no discernible trend.

In Ashkelon, for example, home prices were unchanged in the first quarter, but were up 13% from a year ago to an average of 1.087 million shekels ($281,000) at the end of March. In Be’er Sheva they were up just 1% in the first quarter, while in Ashdod, Kfar Sava, Haifa and Holon, they rose at relatively modest rates of 3-6% in the year through March.

Kahlon has prioritized the issue of reining in prices since he took over as finance minister a year ago, with his Machir L’Mishtaken (target pricing) program the centerpiece of his efforts. Target pricing offers contractors state-owned land at a discount, as long as they pass the savings onto home buyers.

But the program only got underway in the last few months, with critics like the Bank of Israel saying it is too small to have an impact, directly affecting just 15% of the 100,000 real estate sales done on average every year.

“Although the first target pricing projects are getting underway and being sold to the wider public, we are still talking about the earliest stages and the impact of the program wasn’t evident in the surveyed quartered,” Government Appraiser Tal Alderotti said in the report.

The persistent rise in home prices and repeated failures by the government to address the problem has caused Israelis to flood the market out of fear that prices will keep climbing. Alderotti noted the number of home sales throughout the market for four-room homes had jumped 13% in the quarter.

Since the start of 2009, the government appraiser said the average prices of a four-room home had doubled in many cities. In Haifa, it climbed from 743,000 shekels seven years ago to 1.28 million shekels at the end of the first quarter of 2016. In central Israel’s Modi’in, prices rose from 1.07 million to 1.8 million shekels, and in Tel Aviv from 1.6 million shekels to almost 3 million shekels.

The biggest increases in the first quarter were in the southern resort city of Eilat, where the average price rose 5% to 1.097 million shekels. In Tel Aviv, they were up 4% to 2.961 million. Ramle, Modi’in and Netanya also saw rises of about 4% on average, the appraiser said.

On a year-on-year basis, Herzliya saw the biggest rise: 14%, to an average of 2.337 million shekels, and in Netanya they rose 12% to 1.636 million. A few cities saw quarterly declines, including Holon, where they were down 3% to 1.672 million shekels. In Jerusalem, prices were almost unchanged for the quarter and the year, to an average of 1.929 million shekels for a four-room home.

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