Home price rise in Israel becomes a leap

Apartment for sale / Photo: Shiri Dover , Globes
Apartment for sale / Photo: Shiri Dover , Globes

Prices rose by an annualized 6% between May and November last year, with the rise accelerating from the second lockdown onward.

Ironically enough, Israel's second lockdown can be identified as the point at which the rise in home prices in Israel became a leap. In September, and even more so in October and November, prices rose steeply. And perhaps the most surprising thing happening to the Israeli real estate market these days, after the way the market emerged from the first lockdown, is that no-one is surprised,

Home prices in Israel are gathering momentum. How much momentum? Last week, "Globes" reported assessments by the Ministry of Finance, the Israel Land Authority, and the Ministry of Housing and Construction, that home prices would rise by 3-4% annually over the next few years. We also said that these assessments were conservative, and that other players saw even sharper rises. Lo and behold, between November 2019 and November 2020, home prices rose 4%, and the government ministries' forecasts for the future are coming true in the present. That, however, is not the most significant point.

Over time it has become clear that the first lockdown in the face of the coronavirus pandemic, in March-April last year, was a watershed in the market. Between the end of that lockdown and last November, home prices rose by 3.6%, giving an annualized rate of increase of 6%, much of which, as mentioned, occurred starting from the second lockdown.

Political uncertainty leads to home price rises

What happened in the second lockdown that didn't happen in the first, when home price fell slightly? Nothing to do with Covid-19 as such. Although the deep fears that accompanied the first lockdown receded somewhat after it, as the second lockdown approached it became obvious to what degree the government's dysfunction was incorrigible, and the public realized that Israel was on its way to another election.

Political instability is a surefire recipe for rises in home prices. That trend emerged at the end of 2018, when the country was dragged into the current series of elections. The first lockdown did interrupt a continuous and fairly moderate rise, but, when it was over, the bitter truth was exposed: the public saw how the government was dismantling previous minister of finance Moshe Kahlon's toolbox for dealing with the housing issue purely in order to placate Minister of the Interior Arye Deri and Minister of Construction and Housing Yaakov Litzman, and not in order to present a new affordable housing policy. The public saw that the current government had no interest in the matter and no order of priorities, and that there was no sign of it formulating any genuine policy. It saw, and responded.

Homebuyers returned to the market, breaking records for purchases. Neither the lockdown nor the Jewish holiday season got in their way. Perhaps the opposite happened. Since people couldn't travel overseas, they had time to look for an apartment to buy even during the holidays. The cut in purchase tax by current Minister of Finance Israel Katz prompted demand from investment buyers, who had been almost completely banished from the market for several years.

The district that pulled the market upwards in the period following the first lockdown was Jerusalem, which recorded a 5% price rise in the seven months from May to November. It was followed by the central and northern districts, with a rise of 3.9% each. Tel Aviv actually saw a small rise in relation to the national index, of 3.4%. The southern district, where the rise was 2.4% in that seven month period, and the Haifa district, with a rise of 1.6%, moderated the overall rise the most.

In the final quarter of 2020, the average price of a home in Israel reached NIS 1.574 million, which compares with an average price of NIS 1.543 million in the second quarter.

Published by Globes, Israel business news - en.globes.co.il - on February 16, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Apartment for sale / Photo: Shiri Dover , Globes
Apartment for sale / Photo: Shiri Dover , Globes
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