Home Prices in Israel Mark Their Fifth Monthly Decline

Treasury’s chief economist says sales of homes continued their decline even as government’s centerpiece program for bringing cheaper homes to the market reached a record high for sales in February

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

Home prices marked their fifth monthly decline in January-February as sales of homes dropped 12% in February from the same time last year, the government said on Sunday.

The Central Bureau of Statistics said prices fell from mid-January to mid-February by 0.2%, bringing the decline in prices since the market started to turn lower in September last September to 2.4% For the 12 months ended in mid-February, prices were up 0.8%, their smallest rise in six years.

The housing figure came as part of the March consumer price index, which showed an 0.3% rise. The figure brought inflation for the last 12 months to 0.2%, we below the government’s target of 1-3% annually.

Meanwhile the treasury’s chief economist, Yoel Naveh, said sales of homes continued their decline even as Machir L’Mishtaken (Buyer’s Price), the government’s centerpiece program for bringing cheaper homes to the market, reached a record high for sales in February.

“Including the large number of sales purchased in the Machir L’Mishtaken framework, which reached its highest month toll ever in February (1,100 units), there was still a decline in sales both in comparison with the previous month (a decline of 4%) and February a year ago (a decline of 2%),” the treasury said.

If the decline on home prices continues – which is likely to be the case as the Machir L’Mishtaken program is only expected to peak several months from now – it will mark a signal victory for Finance Minister Moshe Kahlon.

Kahlon has made reversing a decade of soaring home prices his top priority through Machir L’Mishtaken and the higher taxes he’s imposed on property investors, who he has sought to drive out of the market.

The treasury figures on home sales suggest that the tax have worked. Property investors accounted for just 13% of all home purchases in February, the lowest share in a decade. Meanwhile Machir L’Mishtaken has grown to such a giant that it accounted for 13% of all sales.

Meanwhile on the price side of the market, the pace of declines was highly uneven. In Jerusalem, they have plummeted 7.4% since September, far more than anywhere else in the country. In Tel Aviv, the drop was just 0.4%, the lowest anywhere in Israel, while in the center the drop was 1.3% and in Haifa 1.6%, In the northern district it the decline was 2,8% and in the south 1.8%.

The treasury said it found that as prices are slipping, many second-time buyers are putting themselves in a dangerous situation by signing contracts to buy a new home before they sell their current one. The sudden change in the direction of prices caught them by surprise.

Not only has Machir L’Mishtaken effectively lowered prices, the declining pace of home sales has forced contractors in the “free” market to lower their prices as they seek to reduce their stock of unsold homes.