Tel Aviv home price surge resumes

Kaplan Street, Tel Aviv  / Photo: Barak Brinker, ira prohorov
Kaplan Street, Tel Aviv / Photo: Barak Brinker, ira prohorov

After a year in which prices fell in the city, last year Tel Aviv again opened up a gap with the rest of Israel.

The rate of increase in Tel Aviv real estate prices is returning to the high levels of a few years ago. That at any rate is what is indicated by the figures published by the Central Bureau of Statistics on Friday. Despite a slight monthly decrease in the most recent reading, housing prices in the Tel Aviv district rose 5.7% in 2019. The buoyant state of the Tel Aviv market is also indicated by the annualized 6% increase in the number of transactions in the fourth quarter. Price increases in Tel Aviv were almost double the 3% nationwide average price increase.

The only district in which prices rose in December was the Haifa district, in which prices were up 0.7%. Prices were unchanged in the southern district in December and fell in other districts: by 0.4% in the northern and central districts, and by 0.2% in the Jerusalem and Tel Aviv districts.

In 2019 as a whole, prices rose by 3.8% in the northern district, while price rises in districts other than the northern and Tel Aviv districts were below the average nationwide increase. Prices rose by 1.8% in the Haifa district, 1% in the central district, and 0.8% in the southern and Jerusalem districts. In other words, there are clear indications that the falling price trend in Tel Aviv in 2018 (amounting to a 4% drop) has come to a halt, and once again Tel Aviv is opening up a price gap in comparison with other areas of the country.

When housing prices increase, the average price of a deal also usually goes up. The two concepts are not the same. When the public was buying cheap homes in outlying areas, as was the case in recent years, prices of deals fell, but the housing price index did not necessary decline. It has recently risen, because despite the relatively small number of deals for more expensive homes, prices have not gone down. In a comparison of the fourth quarter of 2018 with the fourth quarter of 2019, prices of deals in Tel Aviv were up by an average of 6%, with the average price reaching NIS 2.21 million in the fourth quarter of 2019. Nationwide, the average transaction in the fourth quarter of 2019 was NIS 1.53 million, 0.7% more than average in 2018.

Jerusalem district housing prices fall

The case of the Jerusalem district is an interesting one. Prices of transactions there fell last year from over NIS 1.8 million to NIS 1.55 million, a 14% drop. Prices in this district were affected by the large number of Buyer Fixed Price Plan projects in Jerusalem and Beit Shemesh (which are not filtered out, unlike the practice with the housing prices index, which rose in the Jerusalem district).

In the fourth quarter of 2019, the average deal price was up 3.8% to NIS 942,000 in the northern district. In the central district, deal prices averaged NIS 1.84 million in the fourth quarter of 2019, 5.7% more than in the fourth quarter of 2018. The average deal price in the Haifa district rose 0.1% to NIS 1.22 million, while the average deal price rose 0.5% to NIS 1.1 million in the southern district.

The price index for new housing can give an indication of the recent trend from a different direction. This index is based upon the average value of the prices of all homes purchased from contractors, including under the Buyer Fixed Price Plan. The large number of transaction in subsidized homes in this program pushed this index down a few months ago, but the index rose in the past two months, and wound up the year with a total decrease of 3%. What happened with the prices of new homes purchased on the open market is unclear.

Few homes were purchased under the Buyer Fixed Price Plan in the Tel Aviv district, where the open market was dominant. The Central Bureau of Statistics released figures on Thursday showing that Ramat Gan was the leader in new home sales in the fourth quarter of 2019 with 810 sold, followed by Tel Aviv with 400 and Herzliya with 386. Most of the other leading places in new home sales in the quarter - Shoham, Beer Yaakov, Jerusalem, Beersheva, Sderot, Beit Shemesh - were in leading positions because of the Buyer Fixed Price Plan. Price differences between the Tel Aviv district and the rest of Israel are therefore widening.

What lies ahead? Because of the political paralysis, repeated elections, and low interest rates, the rising trend in prices will probably continue. What will happen after the elections? No one knows the answer to that question.

Published by Globes, Israel business news - - on February 16, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Kaplan Street, Tel Aviv  / Photo: Barak Brinker, ira prohorov
Kaplan Street, Tel Aviv / Photo: Barak Brinker, ira prohorov
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