Home prices have been rising since elections were called

Buyer Price project in Yavne  photo: Eyal Fisher
Buyer Price project in Yavne photo: Eyal Fisher

In the past three Knesset election campaigns in Israel, there has been a repeated pattern of price increases.

Prime Minister Benjamin Netanyahu last December announced the dissolution of the government and new elections. An examination by "Globes" found that the Central Bureau of Statistics' housing prices index has since changed direction and risen by 2%. In the four previous months, the trend in prices was downward in almost all areas of Israel. Since then, however, price have begun to climb. "Globes" analyzes the reason for the change in trend.

1. Price rise during an election campaign

An examination of the past three election campaigns shows a repeated pattern of price increases. It happened before the January 2013 elections and before the March 2015 elections, and also in the period before the elections last April. It can therefore be expected to occur before the elections this September. Why does the announcement of elections cause prices to rise? Because recent governments were committed to bringing prices down, and each one of them tried to implement a policy to make it happen. As soon as the government dissolved, the public realized that the policy for lowering prices would go with it, and the market resumed its previous format - a market with no brakes. The result? A 2% rise in housing prices.

2. The major increase in prices is in northern Israel

Segmenting by geographic regions shows a sizeable difference between districts. In three of them, northern Israel, Jerusalem, and Tel Aviv, a real turning point can be cited around the announcement of elections, because prices there were falling up until then. The steepest rise in housing prices in January-May was 6.2% in the northern district. This is a dramatic change, considering that the average annual increase in housing prices in the past 59 years was only 2.5%. Actually, such a rate of increase is reminiscent of the prices rises in 2009-2010. In the Haifa district, the upward trend began in the second half of 2018, and picked up speed in recent months. In the central and southern districts, "Globes" found no strong connection between the elections announcement and price changes, despite the fact that in the four months preceding Netanyahu's announcement of early elections, housing prices in these districts actually fell.

3. Lack of confidence in the future of the Buyer Fixed Price Plan

It is important to mention that the Central Bureau of Statistics' data are not final (the data are revised three months later). This is mainly significant for the northern district, where demand is fairly, low, while construction has been intense in recent years as a result of the large number of Buyer Fixed Price Plan projects, particularly in the Krayot region north of Haifa (Kiryat Ata, Kiryat Bialik, Kiryat Haim, and Kiryat Motzkin), which borders this district, although it is not part of it. Why are prices rising now before elections? "There are two reasons," explains Eran Amor, manager of the northern division of the Eldar housing marketing company. "The first is that people have realized that the Buyer Fixed Price Plan story has come to an end. The other, which also involves the Buyer Fixed Price Plan, is that the plan's discounts in the north were significantly lower than those in the center and elsewhere. These discounts were so small that it wasn't hard for people sitting on the fence to jump off and buy homes now. The market in many places, such as Nahariya, Afula, and Akko, was stagnating, and now you see movement in it."

4. Move-up buyers are responsible for the price rises

Moti Yisgav, who markets new homes throughout the northern district, explains that because the situation that has been created, move-up buyers have gotten off the fence, leading to an increase in the number of deals and in purchases of more "expensive" properties. Meshulam Levinstein Contracting & Engineering Group director for sales and marketing Sharon Ben Zvi also cites an increase in movement by buyers and a rise in prices. "In our private housing unit projects, in Yokne'am, housing units were sold for NIS 2.2-2.3 million three years ago, and are now being sold for NIS 2.8-2.9 million," she says.

Dror Ohev-Zion, owner and CEO of Dara Real Estate Marketing, which is marketing a private housing unit project in the old center of Kfar Vradim, one of the most prestigious communities in the Western Galilee, agrees. "The prices of new private housing units in the community rose 5% six months ago. For example, 150-square meter houses on a 250-square meter lot were sold for NIS 1.6-1.62 million in the past three months, while identical houses were sold for NIS 1.5-1.52 million six months ago," he says.

Published by Globes, Israel business news - en.globes.co.il - on July 21, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Buyer Price project in Yavne  photo: Eyal Fisher
Buyer Price project in Yavne photo: Eyal Fisher
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