Housing prices rose nearly 10% over past year, are predicted to keep going up

Finance minister promises government will narrow gap between supply and demand within 3-4 years

View of a construction site in the central Israeli town of Beit Shemesh on September 5, 2021. (Nati Shohat/Flash90)
View of a construction site in the central Israeli town of Beit Shemesh on September 5, 2021. (Nati Shohat/Flash90)

The price of housing in Israel rose by nearly ten percent over the past year, according to figures published Monday, with Finance Minister Avigdor Liberman predicting that they will climb even higher by the end of the year.

Numbers from the Central Bureau of Statistics showed that over the past year housing prices rose by 9.9%.

Addressing a convention of the Real Estate Appraisers Association in Israel, held in Eilat, Liberman said the prices will have risen by more than 10% by the end of 2021.

The minister said there are five elements that influence housing prices, two of which — the prime interest rate and sea freight costs — are beyond government control.

The other three — demand, supply and planning — are areas where, he claimed, government policy has “broken records this year.”

Liberman said that with the state budget having been approved earlier this month, the gap between supply and demand in the housing market will be closed “within three to four years.”

CSI figures showed prices did not rise in all areas during August-September compared to the previous month, dropping in Tel Aviv (0.3%) and Jerusalem (0.1%). The highest rise was in the south (1.6%) and the central region (1.5%). In Haifa, prices rose 1%.

However, compared to prices over the same period last year, there were rises across the board. In the central region, prices rose 11.9%, in Jerusalem 9.9%, in the north 9.6%, in the south 9%, in Tel Aviv 8.8% and in Haifa 8.1%.

Finance Minister Avigdor Liberman speaks during a press conference, presenting new reform on housing, at the Ministry of Finance offices in Jerusalem, October 31, 2021. (Yonatan Sindel/Flash90)

On Sunday, the Bank of Israel announced a series of reforms it said are meant to make the process of taking out a bank mortgage more transparent and competitive for borrowers.

BOI issued instructions to Israeli banks to present potential mortgage-takers with three uniform options on interest rate tracks to facilitate the process, increase transparency and promote better understanding, and generally make it easier for borrowers to compare between banks.

The new measures will allow customers to submit an application for a mortgage online, and ensure that the banks provide all who qualify with a standard initial approval in a uniform format within a few days of the request.

According to the new plan, the banks will also be required to provide the total projected interest rate, the total forecast payments for the entire mortgage period, and the highest possible monthly payment according to the forecasts, as well as simulation calculators for different mortgage plans.

Illustrative: Construction site for a new skyscraper in Jerusalem on April 26, 2021. (Nati Shohat/Flash90)

At the end of last month, the government unveiled a major housing plan for 2022-2025, aimed at rapidly increasing the supply of apartments in the hopes of reducing prices. Israel has been facing a housing crisis for at least a decade that is seeing prices climb significantly.

According to a recent study by the Alrov Institute for Real Estate Research at Tel Aviv University’s Coller School of Management, the average cost of a four-room (three-bedroom) apartment in Israel stands at NIS 2.2 million ($682,608), and the average equity required for a minimum 30% down payment and surrounding expenses was estimated at about NIS 840,000 ($261,140).

Despite these hardships, the value of mortgages taken by Israelis in August hit a record high of NIS 11.9 billion ($3.7 billion). In October, the value of mortgages stood at NIS 10.7 billion ($3.45 billion), according to BOI.

The CSI also reported Monday a rise in the Consumer Price Index of 2.6% since the start of the year.

“We can’t reach a situation in which the price of milk in Israel is 80% higher than the rest of the world,” Liberman said in Eilat and reiterated accusations that retail chains are inflating prices, saying the outlets “didn’t do badly at all, even during the coronavirus.”

Liberman said that by the end of the week the government will put together two packages for dealing with the cost of living and exports, promising they will be “very significant steps.”

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