Israeli Housing Starts Seen Dropping to Lowest Point Since 2014

The government’s efforts to increase and supply and lower prices don’t seem to be working

Jerusalem housing construction. A crane towers over a construction site in the capital.
Daniel Bar-On

The annual pace of housing starts has slid to 2014 levels, sinking below 50,000 units based on the first nine months this year, the Central Bureau of Statistics said Tuesday.

The numbers suggest that Finance Minister’s Moshe Kahlon efforts to cool demand for housing and boost supply to halt rising prices are not working. The 50,000 figure is considered the minimum pace necessary for the country.

Housing starts for third quarter this year came in at 10,786 units, an 11% drop. From October 2016 through September this year, every region of the country saw a decline except Haifa and the southern district, which saw rises. Ashkelon in the south and Haifa suburb Kiryat Motzkin were among the top four cities for housing starts.

Nine months ago the Finance Ministry projected 60,000 housing starts for 2017, to be followed by 62,000 both next year and the year after. But this year is already not expected to reach 50,000, and the country has not seen an annual figure as high as 60,000 for more than 20 years.

Still, the ministry seems to be meeting a goal it also wrote about at the beginning of the year: shifting new housing to outlying areas of the country. This would mainly be done through Kahlon’s flagship Mechir L’Mishtaken program, which offers contractors land at reduced prices in an effort to tamp down housing prices.

From October 2016 through September 2017, there were 2,694 housing starts in Tel Aviv, the most of any city, though that still represented a 3% drop from the period a year earlier.

Second on the list was Jerusalem, with 2,635 starts, up 9%. In third place, Ashkelon on the southern Mediterranean coast, showed a 56% increase to 2,142 units, followed by Kiryat Motzkin at 1,858, an increase of more than sixfold.

These cities were followed by the Tel Aviv suburbs of Rishon Letzion and Ramat Gan, and Haifa, which, at 1,233 housing starts saw a 28% increase over the period a year before.

There was ample proof that the ministry’s efforts regarding Israel’s regions were working; more than half the housing starts were done outside Tel Aviv and Jerusalem. But that prompts the question of whether demand will follow; of whether employment opportunities and the development of proper infrastructure will also increase.