No Relief for Housing Market

YERUSHALAYIM -

A year and a half after mass demonstrations over the cost of living and housing in particular, the outlook for the Israeli housing market remains rather bleak, according to recently published data.

The Bank of Israel Monetary Committee said on Tuesday that only supply-side intervention would be sufficient to increase the housing inventory and lower prices, Globes reported.

“Home prices have continued to increase at a rapid rate in recent months. Committee members emphasized that monetary policy acts primarily on the demand side, while the required steps are supply-side steps that have the ability to lead to an increase in the inventory of homes while reducing prices, and such steps are not expected before the new government is constituted and the budget is passed.”

The Israel Lands Administration sold over the course of 2012 was equal to 15,400 housing units, a 40% drop from 2011’s 25,500, and the lowest level of sales since 2008, according to Haaretz. The figure spells a negative impact on housing starts in the coming two or three years.

The Housing Ministry blamed the drop in sales to the tight credit currently experienced by the construction industry.

“An examination by the ministry found that one of the main barriers to increasing building starts is the limits on credit to the industry,” it said, citing as well a shortage of equity for contractors and higher loan charges. “The relative cost of building has risen, making it less attractive to participate in [ILA] tenders,” it said.

Two initiatives to create more affordable housing in the wake of the 2011 social justice protests resulted in land designated for some 6,700 homes marketed by the ILA. But the amount of land actually sold under the two measures was relatively small, suggesting that contractors don’t find the terms attractive.

In addition, rentals have risen dramatically over the past few years. Since January 2008, the cost of renting in Tel Aviv has soared 50.3%. The national average over the five years was a rise of 42.7%, ministry figures showed.

More increases in rentals is expected, because the number of investors buying homes is shrinking, putting pressure on the supply of rental apartments.