While many developers and contractors are saying that the real estate industry is in serious crisis, the construction statistics paint a complicated picture. On the one hand, there has been a rise in the number of building starts, but the figures for completions indicate a difficult situation.
Other indicators that the situation is not good are the decline in the number of building permits issued, which means that fewer housing projects are being planned, and a rise in the number of homes actively under construction, which could mean that projects are behind schedule.
Some 16,000 housing starts were recorded in the first quarter of this year, which would be a very reasonable number even if there were no war. This contrasts with the final quarter of 2023, when the effect of the war was sharply felt, and the number of building starts fell below 13,000.
In other words, looking at the first quarter, the construction industry does not appear to be in difficulties, despite the lack of tens of thousands of Palestinian workers, who have been denied entry into Israel since the war began, and despite the fact that the workers from overseas who were supposed to replace them have so far arrived in very small numbers.
Easy to start construction, harder to complete it
The Israel Builders Association has explained in the past that to start construction and to be counted as having done so by the Central Bureau of Statistics is a very easy matter: basic excavation and lining work is sufficient to count as a building start. The industry’s real problems come at the actual construction stage, which is where the delays are occurring.
This is evident in building completions, which amounted to some 12,000 in the first quarter, the lowest quarterly figure since the third quarter of 2022, and in the number of homes under active construction, which rose 2.4% to 174,000, the highest quarterly figure for a decade.
The numbers for the award of building permits, which is almost the last step by Planning and Building Committees in approving developers’ plans and giving them the green light to proceed with construction, are also not positive. In comparison with the final quarter of 2023, the number of building permits issued fell 30% to 14,800, the lowest since 2020.
In addition, if the industry is examined on an annual basis, that is, what happened from the beginning of the second quarter of 2023 to the end of the first quarter of 2024, a slight decline emerges of 1.5% in the number of building starts to some 63,000 in this period. In comparison with the corresponding period two years earlier (second quarter 2021 to first quarter 2022), the decline is almost 10%. This is attributable mainly to the rise in interest rates in 2022, which shrank the construction industry considerably.
Jerusalem continues to lead
For the second successive year, Jerusalem emerges as the construction champion of Israel. In the twelve months between the beginning of the second quarter of 2023 and the end of the first quarter of 2024, construction of 6,736 housing units was started in the city, 43% more than in the preceding twelve months.
Tel Aviv is in second place, after leading the table for many years. The number of building starts in the city rose 22% in the current period, to 5,334 units. In third place is Ashdod (2,789), followed by Lod (2,767), and Haifa (1,820).
In that twelve-month period, construction started on 13,600 housing units following the demolition of existing buildings. The net addition was 11,000.
In the same period, construction began of 3,990 housing units as additions to existing buildings. 27% of these were in Tel Aviv, and, surprisingly, a quarter were in the northern region, but the figure is still lower than it needs to be.
Published by Globes, Israel business news - en.globes.co.il - on June 23, 2024.
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