Tel Aviv's housing market has been re-categorized from the 'yellow' overvalued bubble risk category to the 'grey' moderate risk bubble category in the UBS Global Real Estate Bubble Index 2024. Two years ago Tel Aviv was in the 'red' high bubble risk value category.
The report recalls, "Propelled by falling interest rates and an intensifying housing shortage, real house prices in Tel Aviv tripled between 2002 and 2022. The bubble risk was high in 2022: the price level in the city decoupled from the rental market and prices in the rest of the country. Household incomes could not keep up with prices, leading to stretched affordability.
The report continues, "It is no surprise that rising mortgage rates ended the boom two years ago and demand shifted to the rental market. Mortgage volume growth has quartered since then. As a result, real prices fell by 10% by the end of 2023. However, dwelling transactions have started to recover in 2024, despite security concerns."
UBS warns, "On the latter topic, leading indicators suggest that the conflict is starting to weigh on the economy, while the room for monetary policy support from the Bank of Israel is limited due to still-elevated inflation. Attempts from various sides to broker a ceasefire have been unsuccessful so far, increasing the possibility of a prolonged conflict. The growing economic damage raises the risk of spillovers into the local real estate market. Although price growth is supported by low construction, some demand is driven by the fear of missing out. Hence, the bubble risk is moderate."
Tel Aviv is ranked 13th of the 25 cities analyzed by UBS in terms of bubble risk.
UBS analysts calculate that on average a skilled employee needs 12 years of salaries to be able to buy a 60 square meter apartment in Tel Aviv.
Published by Globes, Israel business news - en.globes.co.il - on September 24, 2024.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.