Bank Hapoalim Forecasts Continued Drop in Housing Prices Due to War and Economic Factors

By Aryeh Stern

Bank Hapoalim’s financial reports highlight a forecast of accelerated housing price drops in Israel in the forthcoming months. A significant contributor to this projection is the war in the Gaza Strip, compounded by rising interest rates leading to a downturn in the real estate market.

Contrary to a decade-long sentiment emphasizing perpetual housing price growth in Israel, recent figures contradict this narrative. Bank Hapoalim, ranked second in Israel’s market cap terms, projects a sustained decline in housing prices. Factors contributing to this downturn include decreased transaction volumes, a surge in unsold properties, and a slight decline in prices as indicated by Central Bureau of Statistics data.

“The fall in transaction numbers, increased unsold inventory, and a subtle price decline in the initial nine months of this year signal an anticipated acceleration of price drops in the real estate market,” stated the bank.

The Central Bureau of Statistics reported a significant rise in unsold new homes, reaching 61,400 in September, representing a 40% increase over eighteen months. Simultaneously, new home sales plummeted by 31% compared to the previous month and 26% compared to September 2022, with government-subsidized home sales rising to 30% from 18% a year earlier. Moreover, new mortgage loans decreased by over 50%.

Despite seemingly marginal official statistics reflecting a minimal monthly price decline (0.1-0.5%), the cumulative nature of these figures over twelve months masks the continuous price slump. Bank Hapoalim indicated that the actual decline in home prices amounts to 3.9% between August-September 2022 and August-September 2023, surging to an 8.5% decline when excluding government-subsidized homes.

The bank highlighted the discrepancy between official figures and actual market conditions, asserting that benefits offered by developers, not considered in the data, contribute to an even steeper price decline. Bank Hapoalim’s financial reports corroborate this outlook, showcasing an elevated credit loss provision for the construction and real estate sector in the third quarter, signaling an increasing risk level.

Anticipating a further downturn due to the war’s economic repercussions, the bank forecasts diminished economic activity, translating into decreased home purchase transactions and a more pronounced price decline in the real estate market.