New data on the number of building permits issued for the construction of new housing units in the first half of 2014, along with updated Ministry of Housing data on the rate of building starts, indicate that both areas have slowed down. This is likely to cause a decrease in the number of available new apartments in the coming quarters. Furthermore, other factors, such as the zero-VAT on new homes plan, are likely to intensify the situation and prevent a rise in the number of available apartments, further fuelling the rise in apartment prices.
Building permits were granted in the first half of 2014 for 16,097 housing units in Israel. Assuming a similar number of permits is granted in the second half of the year, permits will be granted for 33,200 apartments in 2014. This is 8.6% fewer than 2013, and 12.7% fewer than 2012. This is the lowest number since 2010.
The situation is similar with building starts. In the first half of 2014, building starts totaled 20,859 housing units. Assuming housing starts are similar in the second half of the year, 2014 will end with roughly 41,700 housing starts, which is 10% fewer than 2013, and 3.5% fewer than in 2012.
These figures are based on the assumption that the rate of permit issuance and the rate of housing starts are the same in the second half of 2014 as they were in the first half. However, government plans, including the zero-VAT plan, are likely to drag the numbers downward. Contactors are not launching new projects, and are not promoting new deals, in anticipation of the implementation of the plan, causing the expected number of housing starts and building permits in the second half of 2014 to be lower than in the first half. The wave of housing tenders rejected by the Israel Land Authority in recent months can also be added to the list of contributing factors as well.
Published by Globes [online], Israel business news - www.globes-online.com - on October 6, 2014
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