‘Housing Cost of Living’ Higher Than Ever

The Bank of Israel says that it now takes 147 average salaries to buy an average home, up a staggering 52% from 96 salaries in mid-2008. It calls the ratio “the housing cost of living.”

The figures were released as part of the “Monetary Policy Report — July-December 2013” by the Bank of Israel.

“Home prices continued to increase, and in the 12 months ending in October, prices increased by 8%, similar to the annual rate of increase (the rate of increase looking at the past 12 months) seen in each of the last ten months.

“Further, both the number of transactions and the volume of mortgages stabilized at high levels,” the report states.

For the first time, the Bank of Israel, which blames the government for the rise in home prices, calls the housing shortage a supply shortage, and admits, “In total, over the past three years, the number of building starts exceeded the growth in the number of households. Even though it takes time from the moment construction of a home begins until it is ready for occupancy, this data may moderate the effect on home prices coming from the shortage of homes that was created as a result of low building volumes in the previous decade. The number of building starts continued to grow this year (November, October), and increased from about 42,000 housing units in 2012 to 44,000 units this year.”

Total housing credit has ballooned 70% within seven years, from NIS 169 billion in January 2007 to NIS 287 billion at the end of 2013, an increase of NIS 118 billion.

By comparison, total housing credit rose 23% from 2000 until 2007. “The balance of household credit increased, with the increase taking place mostly in housing credit,” the report states, adding, “Housing credit at the beginning of the reviewed period continued to be issued mostly at variable interest rates, and the share of monthly payment in borrowers’ income remained high.”

This article appeared in print on page 7 of the February 3rd, 2014 edition of Hamodia.