Housing starts hit 10-year high in Q4 2012

Housing starts in the fourth quarter of 2012 reached a 10-year high, according to Central Bureau of Statistics data published today. Housing starts rose 42% to 11,200 in the fourth quarter from 7,877 housing starts in the preceding quarter and 6.1% from the 10,500 housing starts in the corresponding quarter of 2011.

After the slump in housing starts in the third quarter, the renewed activity in the fourth quarter belies contractors' warnings that financing difficulties were liable to result in higher home prices. Housing demand and new mortgages data also point to the large number of new apartments sold, enabling contractors to initiate new projects, despite the difficulties.

However, full-year data show a 13% drop in housing starts from 45,700 in 2011 to 39,700 starts in 2012. The 2012 figure was still well above the 33,000 annual average of housing starts in 2007-09.

The number of homes under construction in the fourth quarter was the highest since 1998, 14 years ago. The Central Bureau of Statistics reports that 85,400 apartments were under construction in the fourth quarter. Housing completions rose by 8% in 2012 to 37,000, a ten-year high.

A breakdown of housing starts by city in 2012 shows that the Tel Aviv-Jaffa topped the list with 3,840 housing starts, followed by the Jerusalem with 2,310, Beit Shemesh with 1,500, and Petah Tikva with 1,280.

Beit Shemesh topped the list in growth in housing starts in 2012, compared with 2011, at 180% growth. Housing starts also increased in Tel Aviv, Hadera, Holon, and Hod Hasharon. However, housing starts fell 52% in Rishon LeZion to 762 apartments in 2012 from 1,591 apartments in 2011. Housing starts also fell 48% in Ashdod, 42% in Yavne, and 40% in Netanya.

Minister of Housing and Construction Ariel Atias said in response, "The data beat the forecasts and ambitious targets set by the government. The marketing of land for residences, which was a hallmark of the ministry in the recent term has proved itself and made a decisive contribution to the increase in housing starts and record number of apartments under construction. Housing starts in the last three years are very close the number during the great immigration in the first half of the 1990s. In the past decade, there was a housing shortage of tens of thousands of apartments, but in the past three years, we have been gradually able to reduce this. Nonetheless, there could have been thousands more housing starts each year, had the relevant parties solved the credit crunch to give oxygen to the real estate market, and avoid harming young couples."

Israel Builders Association general manager Eliav Ben-Shimon said, "In annual terms, we see a 13% drop in housing starts, which proves that the government is not doing enough to deal with the housing supply. This is also seen in the drop in the housing inventory. Fewer than 40,000 apartments were built in 2012, which means that housing starts are still not meeting the natural growth of the population. The main reasons for the drop in housing starts are the credit crunch in the industry and shortage of skilled workers. Less new land was marketed in 2012, which is why we do not believe that the increase in housing starts in the fourth quarter will continue in 2013."

The diametrically opposed quotes are partly due to data each speaker chose to focus on. In conclusion, the number of housing starts and apartments under construction is high. The slump in housing starts in the third quarter corrected in the fourth quarter, but it is hard to predict the data for the first quarter of 2013.

Published by Globes [online], Israel business news - www.globes-online.com - on February 28, 2013