The small number both of residential real estate deals and of building starts under the buyer fixed price plan have cause a drop in the number of building starts in Israel in the third quarter, the second straight quarter in which housing starts have fallen, according to figures published today by the Central Bureau of Statistics. The figures show that building starts totaled 10,796 nationwide in the third quarter, 3.6% fewer than the 11,203 building starts in the preceding quarter and 20% fewer than the 13,552 building starts in the third quarter of 2016.
The figures pose a problem to the Ministry of Finance, which announced that it would take action to increase the number of building starts to over 50,000 a year, or even 60,000 a year. Construction began on 35,800 new housing units in the first three quarters of 2017, compared with 41,100 in the first three quarters of 2016.
The number of building starts in October 2016-September 2017 was 49,745, 6.3% fewer than the 53,099 building starts in October 2015-September 2016. Segmenting by districts shows that the steepest drop in building starts during this period was 25.6% in Judea and Samaria, followed by 16.6% in the Jerusalem district, 14.5% in the central district, 9.6% in the Tel Aviv district, and 4.9% in the northern district. Housing starts were up in the Haifa (15.7%) and southern (2.6%) districts.
The Central Bureau of Statistics also published figures for housing units completed in the third quarter of 2017. Construction of 12,108 housing units was completed in the third quarter, more than the 11,547 housing completions in the second quarter and 11,121 in the third quarter of 2016. The number of housing units under active construction in the third quarter was 114,000, slightly fewer than the 115,300 housing units under active construction in the second quarter.
Building starts were down strongly in Beit Shemesh, Beer Sheva, Herzliya, and Netanya.
The steepest fall in the number of building starts was 51.3% in Beit Shemesh, and Beer Sheva (a 42.7% drop), Herzliya (40.3%), and Netanya (42.9%) also stood out. Quite a few buyer fixed price tenders were published for these cities, but have not yet been reflected in the building starts figures. At the same time, the number of building starts was up in Kiryat Motzkin (over 500%), Lod (249%), Modi'in (226%), and Bat Yam (164.8%).
The decline in building starts can be attributed to a number of causes. The first is a shortage of land available for construction, because state-owned land has been marketed exclusively for the buyer fixed price plan for over two years. At the same time, deals on private land have become more expensive and combination deals more complicated. This has pushed down the number of land deals, which has reduced the supply of plots on which construction of housing units can begin.
At the same time, the real estate sector has been warning for a long time that housing starts in the quarter would show a decrease because the cooling off of the market is making contractors and developers delay the beginning of projects out of concern that they will have problems selling housing units later. The third reason is the fact that while buyer fixed price tenders are being closed, it is taking time to obtain building permits for these projects, among other things due to the marketing of lots that are not yet available because of objections filed to various projects.
It is however important to note that, like other housing figures, the Central Bureau of Statistics' figures for building starts in the third quarter of 2017 (the latest available figures) are likely to be revised later. A Bank of Israel study found that initial building starts figures published are 10% lower on the average than the revised figures published several months later. This was the case in the second quarter of 2017.
Published by Globes [online], Israel Business News - www.globes-online.com - on December 19, 2017
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