Building starts in Israel fall sharply in 2018

Building starts Photo: Eyal Izhar

Building starts were strong where Buyer Fixed Price Plan campaigns were held and weak in most other places.

Almost 14,000 building starts in Israel n the fourth quarter of 2018, mostly in the Buyer Fixed Price Plan framework, greatly improved the pace of building starts on the year. The number of building starts in 2018 nevertheless fell for the second consecutive year, hitting its lowest point since 2012. Figures published by the Central Bureau of Statistics also showed an increase in building starts in the center, while the steepest decrease in building starts was in outlying areas in the Haifa, northern, and southern districts.

Building starts were down 10.4% in 2018, matching the number of deals. Both the number of deals and the number of building starts increased in the fourth quarter. Three years ago, the government set an annual target of 60,000 building starts. This target was almost achieved in 2016, but the trend since has been in the wrong direction.

The Buyer Fixed Price Plan is setting the course of the construction sector, for better or for worse. This is reflected in a general decline in building starts resulting from the suppression of a large part of the free market, with surges in construction starts in various places where Buyer Fixed Price Plan campaigns were held. Most of the leading cities in building starts were the locations of Buyer Fixed Price Plan campaigns. Jerusalem, the leader with 2,877 building starts; Herzliya in third place with 1,685 building starts; Rosh HaAyin in fourth place with 1,640 building starts; Rishon Lezion in fifth place with 1,569 building starts; Beer Sheva in seventh place with 1,232 building starts; Tirat Hacarmel in eighth place with 1,204 building starts; and Haifa in 10th place with 1,162 building starts were all locations of large Buyer Fixed Price Plan campaigns. The absence of any connection between Buyer Fixed Price Plan construction and real demand is clear.

The Central Bureau of Statistics' figures show that developers are very aware that there is no such connection, and therefore refuse to embark upon additional adventures in outlying areas, as they mainly did in the middle of the decade. Building completions reached a peak of 50,000 in 2018, but this is a result of the peak in housing starts two and three years ago. Building completions in 2018 were at the highest point in the past five years in the Haifa and southern districts, while building starts in these districts reached their lowest point in years, because the developers are abandoning the outlying areas.

The largest district is still the central district, which includes the entire area south of Hadera, north of Ashdod, and around Tel Aviv. Building starts there totaled 11,742 in 2018, 5% fewer than in 2017. What is striking is that in the second half of 2018, the Tel Aviv district overtook the central district, an unusual occurrence. Cities that are usually in the forefront of construction, such as Petah Tikva and Netanya, dropped below 10th place (Petah Tikva was in 13th place with 935 building starts and Netanya was in 16th place with 772 building starts). The surge in construction in Rishon Lezion, Rosh HaAyin, Rehovot, and Yavne was a large part of the reason that the central district is still the leader.

Israel Builders Association CEO Amnon Merhav said in response that the downtrend had been continuing for years. "It is bad news for the public in need of housing solutions in Israel. The next government has to stop ignoring the huge gap between the number of apartments being built and the number of households being created here. We estimate that there is a shortage of 165,000 apartments. The supply of apartments is running out. The main task of the next Israeli government should therefore consist of two parts. The first is increasing the supply of land for construction and immediately releasing land zoned for construction of 100,000 housing units in a year. The second is immediately dealing with the problem of regulation and bureaucracy that have created planning chaos in which the people who are supposed to produce housing don't know how to plan their steps. Planning processes and licensing for new construction takes an unreasonably long time. Contractors are willing and want to supply the housing units that the public needs so much. Let us build," he said.

Published by Globes, Israel business news - en.globes.co.il - on March 20, 2019

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

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Building starts Photo: Eyal Izhar
Building starts Photo: Eyal Izhar
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