Just two weeks after the Property Appraisers Association reported that home prices had jumped in the third quarter from a year ago, the Central Bureau of Statistics and the Bank of Israel on Monday both issued signals of a slowdown in Israel’s red hot property market.
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The Central Bureau of Statistics reported that the sale of new homes declined for the third month in a row in October, bringing the drop in the first 10 months of the year from the same time in 2015 to 8.7%, or 24,548 units. In addition, it said the inventory of unsold homes had reached 30,685, its highest since the year 2000 and double the level it was in 2011.
Meanwhile, the Bank of Israel’s monetary committee noted in minutes of its November interest rate meeting that the volume of new mortgages was showing a “moderate downward trend” as interest rates rise.
The committee acknowledged that the pace of price rises for homes hadn’t shown any sign of slowing down, but the minutes added, “ Committee members noted the continued upward trend in mortgage interest rates and that in parallel there appears to apparently be some slowdown in mortgage volumes.”
Finance Minister Moshe Kahlon is betting his political career on tamping down the housing market, but after a year-and-half in office his measures have yet to bring about a turnaround. A supply-demand imbalance, record low interest rates and little confidence the government can turn things around have caused Israelis to buy a home at all cost.
But, as the central bank noted on Monday, interest rates on inflation-linked fixed rate mortgages had increased by 0.11 percentage points in October while on the variable-rate indexed loans the rate has climbed 0.18 points.
Last month the Property Appraisers Association reported that home prices had risen 9% in the third quarter from a year ago, but the CBS figures showed that new-home sales were down nearly everywhere by double digits in January-September except in the southern district where they climbed 19%. They were unchanged in the central region and down 24% in the north and 12% in greater Tel Aviv.
New-home sales in October were just 1,825, but that reflected the large number of holidays during the month, compared with 2015. Still the fact that October was the third month of lower sales could point to a trend of property investors pulling back until it is clear whether Kahlon’s plan to impose a tax on people owning three or more houses wins Knesset approval.