Although 2016 as a whole will be thought of as a successful year for developers of residential housing, the results of a survey released Tuesday by the Central Bureau of Statistics revealed sputtering demand for new residential construction. In the first 11 months of 2016, the sales of new homes declined by 7% compared to the January through November period in 2015.
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The bad news for developers is that the decline appeared to be sustained, rather than an aberration of a month or two. In fact in the second half of the year, the sales pace retreated to what it was in 2013.
This all comes at a time when the government, particularly Finance Minister Moshe Kahlon, is under great pressure to boost housing stocks in an effort to meet stiff demand for homes and in turn to bring down the high cost of buying an apartment, particularly in the Tel Aviv and Jerusalem areas. In fact, the statistics bureau data do show that new home supply has expanded, but most of it is a result of construction in areas far away from the center.
For the first 11 months of 2016, about 27,130 new housing units were sold, which in Israel for the most part means apartments rather than individual private homes. The 7% decline in new residential construction sales compared to the period in 2015 was not across the board. The largest decrease was in the northern district, where sales dropped by about 25%, not including the Haifa area. Jerusalem was next with a 19% decline, while the Haifa district saw a 15% drop; and the Tel Aviv area experienced an 11% drop in new home sales.
By contrast, however, the southern district saw a 28% increase in the sales of new residential construction. There was no substantial change in the sales pace in the district with the largest volume of residential building activity, the central district, which surrounds the Tel Aviv area but does not include it.
The larger picture shows that the pace of home construction over the years has continued to increase along with the increase in the country’s population. Since 2010 the supply of new homes has more than doubled. In 2016, for the first time since 2000, which was a period of mass immigration from the former Soviet Union, the supply of new homes exceeded 31,000.
Since November of 2015, the growth in supply has been away from the center of the country. For example, in the year period between November 2015 and November 2016, supplies in the Haifa district jumped by 54% to 5,447 units. The southern district saw a 43% increase, or 4,913 units. The Jerusalem district saw smaller growth of 9.6% or 3,403 units, but in the Tel Aviv district supply actually fell by 1.9% to 3,620. In the central district, the drop was 0.3% to 8,398 units for sale.