No Relief in Sight for Housing Prices

Over the past week there's been some grumbling in the business pages about an anticipated slowdown in Israel's hi-tech sector, citing layoffs at Intel and a discouraging global outlook for exports. So, if Israel's economy slows will this put negative pressure on housing prices? Not according to the latest reporting in the Hebrew-language business press. Below I summarize and link to a number of articles published in the past week which touch upon the issue of trends in housing prices.

Globes 8 May:

"High Housing Prices in Israel are Only Pressuring the Rental Market" This piece argues that the low-interest environment coupled with excess savings is driving investment in residential property and contributing to rising housing prices. The author states that, "it is a fact that housing prices are approaching a level at which a majority of the public cannot afford to purchase and must continue to rent," and then concludes in typically Israeli hyperbolic fashion, "We are approaching the end of the age of private ownership of housing."

The Marker 5 May:

"The Young People Continue to Attack: New Housing Purchases are at Record Levels in the First Quarter - Rosh HaAyin is the sales leader - Hadera, Kiryat Gat and Ashkelon Top New Residential Purchases, Identified with Demand of Young Couples - Tel Aviv is in Eighth Place"

The Marker 4 May:

"Waiting for Those Disappointed by the Buyer Fixed Price Program" This piece argues that the Treasury's signature housing policy initiative is causing a market distortion similar to that experienced in expectation of Yair Lapid's "Zero VAT" initiative which never materialized. Young people are holding off on housing purchases hoping to qualify for a subsidized unit but once the lottery for qualified purchasers ends then a wave of pent-up demand will hit the market as there are far too few subsidized units to meet demand.

Globes 3 May:

"This is how the Buyers Fixed Price Program is Causing a Sharp Rise in Housing Prices - So why aren't housing prices going down? Recently revealed data illustrates the significant and widespread damage caused by the Buyer's Fixed-Price Program and the reasons why it is inadvisable to wait for a decrease in prices anytime soon." This is by far not the first article in a leading business journal to argue that Treasury Minister Kahlon's flagship program is a counterproductive failure, and it won't be the last.

The Marker 4 May:

"Warning: The Pace of Building is Insufficient with respect to Demographic Growth - The Psagot investment firm does not accept the estimate of the Bank of Israel according to which the current pace of building is enough to satisfy demand and estimates that the growth of the number of households in Israel will increase demand for housing to 55 to 60 thousand units per year - about 20% more than what is being built today."

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