"The current trends in the housing market do not support a significant fall in prices, certainly not in Tel Aviv and the central region," Bank Leumi (TASE: LUMI) economists write in a review published today.
The review states, "There is still a shortage of housing units, and the current rate of housing unit completions still does not cover the annualy number of additional households. In addition, the macroeconomic environment, which supports demand for housing (particularly the interest rate and low unemployment rates), is unlikely to change in the near future, and there are still no alternative investments with a stable return and relatively low risk in the market."
The Bank Leumi economic unit therefore does not expect a significant change in the housing prices trend in the short and medium term (12-18 months ahead).
The economists add, "Sales of new housing units continue to slow, mostly as a result of the exit of investors and young couples waiting for buyer fixed price bargains. Despite this decline, however, sales are still at the average level of the past decade."
According to the Central Bureau of Statistics, sales of new housing units totaled 1,851 in April, the lowest figure since August 2014. Sales of new housing units in January-April were 20% lower than in the corresponding period last year, although last year's sales were relatively high.
The Central Bureau of Statistics says that the principal factors in the recent drop in demand for housing are the wait for buyer fixed price tenders and the absence of investors in the housing market. It also appears that the rise in the mortgage interest rate is having some effect. According to Ministry of Finance figures, the downtrend in the inventory of housing held by investors, meaning that investors are selling more housing than they are buying, continued in the first quarter of the year.
Housing starts have slowed noticeably in 2017. While housing starts were over 53,000 a year in both 2015 and 2016, the annual pace dropped to 45,500 housing starts in the first quarter of this year. According to an estimate by the Bank Leumi economic unit, this figure is less than the minimum required supply in Israel.
On the other hand, it should be kept in mind that the figures for housing starts tend to be upwardly revised to a significant degree following the publication of the initial estimates. It can therefore be assumed that the actual number of housing starts is higher than the current estimate. At the same time, the number of housing units on which construction was completed fell to an annual rate of 49,000 units in the first quarter, compared with 54,300 units in the preceding quarter.
Published by Globes [online], Israel Business News - www.globes-online.com - on June 25, 2017
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