Will real estate prices rise or fall next year – that is the question occupying the minds of many Israelis. Only government officials can provide a clear answer. Apartment supply and demand are not ruled by developers or contractors, but first and foremost by the Israel Land Authority, which controls 93% of state lands.
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No surprise, then, that the head speculator – the organization in charge of Israel's lands – is also the head forecaster. The Finance Division of the Ministry of Construction and Housing has unabashedly announced that "The housing price indexes – the general index, the new apartment price index, and the district index – all indicate that apartment prices will continue to rise, despite the coronavirus crisis. This is due to the growth in demand for residential properties, along with a slowdown in housing starts."
Yes, you heard correctly. The body announcing that prices have risen is the body responsible for lowering them. Which just goes to show – again – that the state is not really interested in lowering prices.
If you're asking yourself whether to invest in housing now or take your time and see what happens, just listen to what these officials, who are supposed to protect us, are saying. Truth is, it's depressing. The only one who dared to tell the public the truth was then-Minister of Housing Yoav Galant, who was chastised by Finance Minister Moshe Kahlon for saying that housing prices will not fall. And he was right. Apparently, he knew then what we are now being told openly by the Housing Ministry: "We failed."
What the Ministry is telling us – perhaps courageously, since there's nothing like telling the truth – is this: "According to data from the Central Bureau of Statistics [CBS], the inventory of new apartments for sale fell over the past year by 22% - from about 49,200 units in January, to about 38,400 units in December. Consequently, the number of supply months of these apartments (the number of months needed to sell the inventory, according to the average number of monthly sales in the past three months) fell from 17.5 supply months on average in 2019 to 10.1 months in December 2020. This finding reflects the decrease in the number of housing starts we've been warning of over the past year. A continued drop in the number of housing starts will lead to a parallel drop in the inventory of new apartments for sale, and may contribute significantly to a rise in prices."
Neither is the Housing Ministry optimistic regarding rent prices, though a decline is beginning to be felt: "Despite the impression created at the beginning of the coronavirus crisis, that many renters (particularly singles) in the Central District are ending their lease agreements and moving to the periphery – fueling a sense that rent prices were falling – the findings of the CBS's quarterly rental market survey reveal that the drop in prices has lagged behind this development.
"In the second and third quarters of 2020, the rise that began in 2019 continued, though at a slower pace than in previous quarters; in the fourth quarter, though, prices dropped. Rent prices were higher in all the districts in the fourth quarter of 2020 in a year-over-year comparison, particularly in the Tel Aviv and Northern Districts, which saw a major rise. It should be noted that the growth rate was lowest in the Jerusalem District (0.6%) and highest in the Tel Aviv and Northern Districts (3.4%).
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"Indeed, rental prices continued to rise even during the coronavirus crisis. A contributing factor was almost certainly the slowdown in the purchase of real estate for investment purposes in 2016-2019. However, according to the rental price index, there was a drop in the last quarter compared to the third one."
What have we learned, then? As always, the market is ruled by supply and demand – as if there is no state or government to rely on.
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