No Relief for Israeli Housing Consumers in 2015, Reports Show

YERUSHALAYIM -
Construction work on new homes outside Afula. Photo by Nati Shohat/Flash90
Construction work on new homes outside Afula. (Nati Shohat/Flash90)

Despite hopes that the opposite would be true, 2015 turned out to be the most expensive year for real estate ever in Israel. Prices for homes rose at least 7.5 percent, according to the business daily Globes, although other indexes said that the true price rise on average for homes was closer to 10 percent, according to the Israel Construction Association.

Finance Minister Moshe Kachlon announced a new plan several months ago that could reduce the cost of homes in several communities, but according to real estate experts, at best those plans will affect the sales of some 5,000 homes, out of a total of about 50,000 expected to be built in 2016. Under the plan, buyers of those homes will receive government subsidies of several hundred thousand shekels each, all in an effort to reduce the end cost to the housing consumer. The right to buy those 5,000 homes will be raffled off to the public and tens of thousands of applicants are vying to win the chance to buy them. If those who lose out on the raffle decide to buy homes anyway, real estate analysts say, the market impact of Kachlon’s program on overall prices is likely to be minimal.

The biggest price increase was in the Modi’in area, where prices rose 12% to 13% last year; however, almost all types of homes, from the smallest apartments to the largest villas, went up in price in 2015. The two exceptions were: in Jerusalem where prices for homes five rooms and larger went down 3.4 percent on average (experts believe that they are still overpriced, even with the price fall), and in the Tel Aviv suburb of Kiryat Ono, which is undergoing a massive urban renewal and rezoning project.

As further testimony to the ongoing price pressures in the housing market, the Bank of Israel announced Monday that Israelis took out more mortgages in December than in each of the previous five months. The amount taken out in mortgages in December was NIS 5.63 billion out of the total NIS 54.7 billion in mortgage money borrowed all year.

In its annual price forecast, the Bank of Israel said that it expects prices to continue to rise, at least for the short term. Eventually, as more subsidized apartments are built, the market should stabilize, and perhaps bring about a mild reduction in prices. But don’t expect miracles, the Bank said. “The public continues to borrow large amounts in order to buy the expensive homes available, and there are numerous risks to the economy in this activity,” meaning that for the time being, with so much (borrowed) money  in the hands of eager buyers, prices are likely to remain high.