Housing prices in Tel Aviv rose by 14% in the first quarter of 2022, according to the G City (Gazit-Globe) Institute for Real Estate at Reichman University (formerly IDC Herzliya), while the national average price rise of a home in Israel in the first quarter of 2022 was 3.4%.
The G City Index is different from the Israeli government's Central Bureau of Statistics, in that it uses the Case Shiller model of repeat sales and comparing previous prices. The Central Bureau of Statistics uses the hedonistic regression method, in which a theoretical model is created for the monetary value of each characteristic such as location, floor, age of the building, number of rooms, size, etc.
Before the Covid pandemic the G City Index was usually higher than the Central Bureau of Statistics housing price index. But over the past two years it has been lower. So while the Central Bureau of Statistics has found housing prices rising 16.3% over the past 12 months, the G City Index finds that they rose 11.9%.
G City Institute for Real Estate CEO Dr. Efrat Tolkowsky says that the difference in the two indices may stem from the fact that the G City index does not include new homes, which are being sold for the first time. This could mean that before Covid, new home prices were rising at a slower rate than second hand homes but are now rising at a faster rate. Over the past year, according to the Central Bureau of Statistics, the average price of a new home (not including Mekhir Lemishtaken) rose by 21% compared with 16.3% for the overall average.
G City's eye catching finding that Tel Aviv homes are rising four time faster than the national average, is supported by real estate professionals in the city, who report a rapid rise in prices. Tolkowsky believes that this is a technical correction, with many of the deals completed before the first quarter of 2022 and that in future quarters the data will balance itself out.
Even so there can be no doubt that Tel Aviv prices are racing ahead of the national average. Since the end of 2020, the average price of a Tel Aviv home has risen by 30%, according to the G City Institute, double the national average. This figure is similar to the Central Bureau of Statistics data, which is explained by the high salaries and income of Tel Aviv buyers, who include tech professionals and their service providers (lawyers, accountants etc.).
Published by Globes, Israel business news - en.globes.co.il - on June 2, 2022.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2022.