Bank Leumi predicts that home prices are set to resume their climb, after a hiatus of a few months, unless the government takes actual steps to boost housing starts.
"It is important to continue proper planning on the supply side and implement plans," says Bank Leumi. "From a macroeconomic perspective, economic policymakers should act across a range of areas to maintain a proper level of housing starts, to prevent a new housing shortage, which could cause prices to again rise."
Bank Leumi notes that, despite the 30% increase in home sales in December, compared with November, "These are figures that were retroactively updated, and which could have been influenced by a large number of sales in a particular project, or other factors. It is premature to draw an unequivocal conclusion from December's figures about a new surge in demand. At this stage, we can say with a high degree of assurance that demand has begun to stabilize."
As for the 14.5% drop in home sales and 29% increase in inventory in 2011 - sufficient for 11.6 months up from 7.3 months a year earlier - Bank Leumi says, "The current level of supply corresponds for now to the continued decline in pressure to raise prices." It cautions, however, that the real question is how long will this trend continue.
Bank Leumi points out that Israel has 2.1 million apartments and a similar number of households, which means that it is impossible to say that there is a supply surplus of homes at the national level. Add to this the low prevailing interest rate, which encourages taking mortgages, the bank concludes that housing demand is stable.
Published by Globes [online], Israel business news - www.globes-online.com - on February 2, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012