In a recent survey, Bank Leumi projects a 9-13% rise this year, and says moderating demand will be slow to affect prices.
Government sources say that this is not what will bring down housing prices,
and that the claim that “there’s a housing shortage” is weak. Although buyers are mainly
falling on new homes, the stock of unsold homes in the hands of the contractors, which
represents the supply of new homes, ranged between 44,000 and 47,000 last year. (At EC Nadlan, we do not see the housing shortage weak!) We all see that the number of houses on the market is ridiculous/
Accordingly, senior government officials believe that the rise in prices is much more to do
with demand than with supply. All agree that 2022 will not see last year’s record sales
volumes, while the pace of construction is expected to remain similar, so that there is no
concern over housing supply, and that is not what the government should be dealing with.
According to these officials, if the aim is to cool the market down, demand rather than
supply should be the focus of policy. How can demand be targeted? Raising purchase tax
for investment buyers and raising interest rates are part of the attempt to do that. It seems,
however, that these measures are only partially effective, and they are not expected to
affect prices in the immediate future.
Bank Leumi believes that although prices will not fall in the coming year, demand will
moderate, and in comparison with the peak year of 2021, in which there were 151,000
transactions, transaction volumes will decline. This will be a consequence of the rise in
purchase tax for investors and the change in monetary policy by the Bank of Israel. Last
week, the central bank raised its interest rate from 0.1% to 0.35%, and Bank Leumi
estimates that the rate will reach 0.75% by the end of 2022.
Bank Leumi does not see the latest government subsidized house purchase scheme as
having any quick effect on prices, and there will be no more lotteries for discounted
housing in prestigious locations such as Tel Aviv, Herzliya and Ra’anana. Those currently
taking place in Tel Aviv are a leftover from the “Buyer Price” scheme.
Extract from Globes, April 24th 2022
