Home Prices in Israel Keep Falling, but So Do Home Sales

The inventory of unsold homes is also on the decline and lower than the treasury thought

File photo: Real estate for sale in Israel.
Eyal Toueg

Israel’s housing market offered some good news and some bad news for Finance Minister Moshe Kahlon on Thursday.

On the one hand, the Central Bureau of Statistics reported that home prices fell for the fourth straight month; on the other hand, there was a sharp decline in sales of new homes and a much smaller inventory of unsold houses than Kahlon estimated last month.

Kahlon has made reining in soaring home prices his top priority as finance minister, squeezing investors out of the residential real estate market with higher taxes and by boosting the supply of affordable homes through his Machir L’Mishtaken (Buyers Price) program.

In the case of prices, the evidence seems to show his initiatives are working. The CBS’ housing price index fell a sharp 1% for the period from December 15, 2017 to January 15, 2018, bringing the decline over the last four months to 2.15%.

Prices were down all over Israel, but in Jerusalem they were down an especially steep 3.1%. For the past four months, the drop was 7.6%.

No other part of the country came close to that decline and industry sources on Thursday were at a loss to explain why. In the Tel Aviv area prices fell 0.8% in the one month, 0.3% in the center, 0.4% in Haifa and 1.6% in the north, In the south they dropped 0.3%, the CBS said. The index of new-home sales nationwide was down 2.1% for the month.

Meanwhile, the CBS said new-home sales in January amounted to just 1,728 units, a 4% drop from December and a 30% drop from a year earlier.

In terms of unsold inventory, the CBS said the number was 23,838 at the end of January and that the figure was declining on average at a rate of 0.5% a month.

The CBS figure is only for homes unsold in the private sector, which was the only segment of the market it surveyed this month. The bureau had stopped publishing the figures in November 2016 amid doubts about the quality of the data it was getting from the Housing and Construction Ministry. In reintroducing the statistics, the CBS opted for now to only count private sector data.

Based on pre-November 2016 figures, housing built at government initiative adds another 20% to 30% to the total, which means the inventory of unsold homes is probably closer to 30,000. Nevertheless, that is far less than the 50,000 Kahlon said was the treasury estimate when he spoke to the Knesset Finance Committee last month.

Finance Minister Moshe Kahlon speaking at the Standards Institution of Israel, Tel Aviv. March 6, 2018.
Meged Gozani