The average price of real estate transactions in Tel Aviv in the second quarter of this year was more than 3.5 million shekels, 20% more than two years ago. The heart of the Israeli real estate market is booming, and it seems there are people willing to pay any price to live in the big city. This emerges from data from the Central Bureau of Statistics on house prices in the second quarter, released earlier this week.

The data shows that the price differentials between major cities are widening, against a background of general price increases that have taken hold since the first phase of the coronavirus pandemic. One observation is that the stock of new homes for sale is decreasing rapidly, as the public is seizing apartments from contractors at an exceptional rate.

Q4s up 14% over one quarter

As mentioned, Tel Aviv is leading the upward price trend. In the second quarter of this year, deals were signed in the city at prices 10% higher than in the first quarter. The average price of a small one- to two-room apartment rose 12% to NIS 2.42 million; the prices of three-room apartments increased by a similar percentage, to 3.2 million shekels; while prices for four-room apartments rose 14% in a single quarter, to 4.28 million shekels. Prices for five-room apartments actually fell 0.8 percent to NIS 4.7 million.

Soaring house prices in Tel Aviv have widened the gap between them and equivalent house prices in other major cities. If two years ago an apartment sold in Tel Aviv was on average 41% more expensive than an equivalent apartment sold in Ramat Gan at the same time, this gap has now widened to 54%. Compared to Jerusalem, the gap has widened from 46% to 67%, and against Haifa it has widened from 139% to 200%, which means that an apartment in Tel Aviv costs three times as much as an equivalent apartment in Haifa.

This is probably why the chief economist of the Ministry of Finance reports in his study of the real estate market that the number of transactions taking place in Tel Aviv is significantly lower than in the past. With prices like these, the city is quickly closing itself off to a large segment of the population who cannot afford it.

In general, the prices of real estate transactions in the second quarter were 3% lower than in the first quarter of 2021. The average price of apartments fell to 1.65 million shekels. One possible explanation is the 5% jump in prices in the first quarter compared to the fourth quarter of 2020.

New housing prices up 6.5% in two months

As mentioned, the inventory of new homes for sale is declining. According to the Central Bureau of Statistics, in May and June alone 10,600 new homes were sold. This is more than half of the total number of new homes sold in 2011, and almost half of the total number sold in 2018. This is historically extraordinary behavior, as we may have seen during the wave of immigration 30 years ago. About 20% of this is explained by purchases under the subsidized purchase price program.

To widen the view a bit, in the first half of this year, more than 25,000 new homes were sold in Israel. This is a dramatic statistic, because the rate of buying new homes is higher than the rate at which they are built. In the space of a year, the stock of new homes for sale fell 30% to around 36,000 at the end of June. If this rate were to hold, the government would find no way to increase the supply of housing, and the only tools left to moderate price increases will be tax measures and additional restrictions on mortgage lending as they have been introduced. already been introduced. Will these tools be effective? This is a difficult question. The prevailing assumption in government is that investment buyers are primarily responsible for the price hikes, but there is also a huge increase in demand from young couples.

Developers seized demand for new homes and rushed to raise prices. The New Home Price Index has risen nearly 6.5% in the past two months, which compares to a 7.7% annual rise in prices for all homes, which people should be aware of. account before signing an agreement to buy a “house out of the box.” Another important statistic in this context is the construction input price index, which is increasing at an annual rate of 6-7%, and is likely to pose problems for new home buyers who do not take them into account.

Rents at a standstill

While house prices are skyrocketing, the rental market remains much slower. The housing services index has only risen by 2% in the past twelve months, and the prices of rental contracts signed in the second quarter of this year have fallen, albeit slightly, by less than 0.5%. The average monthly rent only dropped by 10 NIS, to 4,080 NIS.

The most expensive apartments included in the Central Bureau of Statistics data are five-room apartments in Tel Aviv, which are rented at 9,300 shekels per month. The cheapest are one- and two-room apartments in Beersheva, for which tenants pay NIS 2,038 per month.

Posted by Globes, Israel business news – – on August 17, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Leave a Reply

Your email address will not be published.