The decline in housing prices between late 2017 and January 2018 has halted. Since February 2019, housing prices have remained largely unchanged. The 0.6% rise (subject to revision) in the most recent housing prices index does not change the general picture; it merely highlights the fact that the Buyer Fixed Price Plan did not meet its original target of substantially lowering housing prices. It does not appear that last year's trend will change soon, unless the government's housing policy changes.
The price index for new housing faithfully demonstrates the limitations of the Buyer Fixed Housing Plan. In November 2018-February 2019, almost 40% of the new housing units sold were in the framework of the plan, including 600 apartments sold in Netivot, but the price index still does not show the fall in prices that the Ministry of Finance hoped for.
The fact that Netivot was the place where the most apartments were built in November 2018-January 2019 highlights the market distortions generated by the plan. A rare warning yesterday by the Ministry of Finance chief economist against investments in Or Akiva by young people also shows that the state has made the market unbalanced and unnatural. Another matter worthy of note is the district index, which examines changes in housing prices in six districts. The Haifa district is in first place with a 2.8% increase in housing prices, following by the southern district with a 1.3% increase, the central district with 1.2%. There was no change in the northern and Jerusalem districts, while the Tel Aviv housing price index fell 2.3%.
These findings refute the thesis that the outlying areas will suffer from fairly rapid falls in prices caused by a large supply of discounted housing in the Buyer Fixed Price Plan framework and accelerated construction in new neighborhoods, such as in Kiryat Bialik, Beer Sheva, Netivot, Dimona, etc.
It is difficult to find an explanation for this right now. The number of apartments purchased in the outlying areas is declining steeply, demand for apartments in these areas is falling, but this is not yet reflected in lower prices. On the other hand, in a situation in which the public is staying away from expensive deals, which is currently the case, in a place like Tel Aviv, where prices are high, property owners and developers are compromising on prices.
What does this mean for the future? It is hard to say. The figures are temporary and the market is unstable. Intense construction in Harish, Kiryat Bialik, Beer Sheva, and elsewhere are a fact. The question of the conventional argument that this large-scale construction will necessarily affect the entire surroundings will be proved correct, meaning that construction in Kiryat Bialik will affect housing prices in Kiryat Motzkin, lower housing prices in Haifa, etc. We should beware of this, because domino theories have usually proved wrong in both politics and economics.
Published by Globes, Israel business news - en.globes.co.il - on April 16, 2019
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