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Israel's house prices under pressure

Oct 17, 2017 | 0 Comment(s)


Trend: house prices down 1.93% y-o-y in Q2 2017
During the latest quarter house prices fell by 3.8% q-o-q (4.3% in real terms). Center and Jerusalem Periphery Towns saw the highest price increase during the year to Q2 2017, with prices rising by 9.3%. 
 
Analysis: house prices are being pushed down by higher interest rates.  The Israeli economy is thriving.  Israel’s unemployment rate fell to a record low of 4.1% in July 2017, according to the Central Bureau of Statistics (CBS). The country’s unemployment rate has been declining since 2003.  Mortgage interest rates have risen over 2 years to 3.71%, from 2.21%.  There is also tighter bank regulation, and increases in purchase tax and the taxation of 3rd apartments. against a background of political disquiet about house prices.
 
Rents, rental yields: yields in Tel Aviv are very low at 2.71%
Tel Aviv apartments are expensive, at around $12,742 per sq. m.
 
Israel: city centre apartment, buying price, monthly rent (120 sq.m.) 
   Buying price  Rent per month  Yield
 Tel Aviv - Yafo   $1,529,040  $3,274  2.57%
 
Recent news.  All the news is good. The economy is expected to expand by 3.4% this year, after growing by 4% in 2016, 2.5% in 2015, and 3.2% in 2014, according to the BOI.
 
Wages were up 4.1% y-o-y in May 2017, according to the CBS.  Inflation was -0.7% in July.  In 2016, the country recorded a budget deficit of just 2.1% of GDP – the smallest deficit since 2008, according to the Finance Ministry. 





Market Analysis - Israel
Time series for residential property
 
Average prices of owner occupied dwellings, Israel
Price/Rent Ratio: 37 yrs

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