Housing Prices in Israel See Sharpest Rise Since October 2016

The increase is a blow to Finance Minister Moshe Kahlon’s boast that he and his ministry have pricked the housing bubble

Finance Minister Moshe Kahlon greets supporters during a visit to Israeli city of Hadera, March 13, 2015.
GIL COHEN-MAGEN/AFP PHOTO

The country’s housing prices for May-June 2018 rose 0.9% compared to the April-May period, the steepest rise in housing prices since October 2016, when they rose 1.1%.

The development is a blow to Finance Minister Moshe Kahlon’s boast that he and his ministry had pricked the housing bubble. New home prices rose significantly, by 0.8%, even though 22% of the sampling survey had been sold through his Mechir L’Mishtaken (Buyer’s Price) program.

>>Navigating the maze of Kahlon’s housing reform

Housing prices are not plummeting, just declining, but not consistently. The ability to diagnose if prices have peaked, or if they’re decreasing only temporarily and won’t rise later, is impossible in the short term. We will have to wait a while to determine with finality whether the market reversal is temporary or for real. This inability is especially true when the government intervenes so aggressively in the housing market, as is happening.

The result is irregular fluctuations in the index, and corrections by the Central Bureau of Statistics regarding previous months. Still, a 1.5% rise for this period is exceptional for the swings we have seen until now, which have been in the tenths of percentage points from month to month.

The Tel Aviv area, which constitutes 30% of the index, pulled it up the most with a 2.25% price rise after five straight months of drops. The center, weighted the second highest, saw a 0.6% price rise. Jerusalem, which saw the biggest price declines through February, experienced a 0.8% hike in prices, its fourth straight month of increases. Prices in the south rose 0.7% but only 0.2% in the north. The Haifa region was the only area where prices declined, 0.8% in this case.

Housing prices have gone up 0.4% since the beginning of the year, and remain flat over the past 12 months. They are 1.6% off their peak from August-September 2017.

The average home in the second quarter cost 1.53 million shekels ($415,000), 0.4% less than during the first quarter but 0.3% higher than during the parallel quarter last year.

Regarding prices of apartments bought during the second quarter of this year, compared to the first quarter, Jerusalem stands out. The average price there was 1.88 million shekels, up 6%. Prices for three-and-a-half or four-bedroom homes went up even more steeply, 12%, compared to the first quarter. In the north, apartments were sold for prices 3.6% higher than the ones that went in the first quarter.

In Tel Aviv, in contrast, apartments sold for 0.1% less despite the asking prices going up from the first to the second quarter. The average home went for 2.18 million shekels. In comparison, apartments sold for 2.26 million shekels on average in the parallel quarter. Sellers who took the biggest relative hit owned five-and-a-half or six room apartments, closing on average for 3.22 million shekels during the quarter.

Haifa homes sold for 2.5% more this quarter, 1.22 million shekels. Prices rose most sharply for two-and-a-half and three room homes, up 4.45 to 861,000 shekels.