Housing price rises gain momentum

Housing price increases in Israel have gained renewed momentum, and unlike previous months, when most of the increases came from used apartments, in the last few months of 2024, a change in trend became evident, with most price increases recorded from new apartments. It appears that the increase came in parallel with the increase in financing operations by contractors.

Figures released yesterday by the Central Bureau of Statistics show that housing prices in Israel rose by 0.6% between September-October 2024 and October-November 2024 and rose by 7.8% in the year between October-November 2023 and October-November 2024.

New tenants pay rents that are on average 4% higher than previous tenants, while new leases for contract renewals have increased by 2.6% over the past year. The Housing Services Index, which reflects the rental market, rose by 0.5% in November 2024, and by 3% last year.

Where did prices rise the most?

Housing prices rose in all six regions, with the Tel Aviv region being the main driver of the increase in the index, rising by 1.2%. The Jerusalem, North and Central regions recorded increases of 0.4%, while the smallest increases were recorded in the Haifa region (0.3%) and the South (0.2%).

But when looking at the indicators on an annual basis, the leading areas in terms of price increases are Haifa, where apartment prices rose by 11.7%, and the north with an increase of 10.2%, followed by the Tel Aviv area, which recorded an increase. 8.8%, the center (7.9%), the south (5.2%), and Jerusalem, which recorded an unusually low annual increase of 0.6%.

Does the current indicator reflect what is happening in the market after the ceasefire in the north?

No, the ceasefire in the north was signed at the end of November, so it is likely that only the following two indicators will reflect changes in the markets after the ceasefire. In our assessment, the significant price increases recorded in the northern region mainly reflect increases in the prices of used apartments with a security room, while most of the apartment supply in the two northern regions includes older apartments.

Which prices rose the most? New apartments or used apartments?

After a long period in which most increases were recorded in the prices of used apartments, we see a change that is not reflected in the official Central Statistics Office numbers, but rather in other numbers.

If we focus on the price changes witnessed by new apartments in the free market, it appears that they have increased by about 2% over the past two months, while the general index has increased by about 0.8%.

Why does this happen when the supply of apartments is at its peak?

According to the Central Bureau of Statistics, the supply of apartments today reaches a record level of 71 thousand apartments, which should have put pressure on the decline in apartment prices. In our assessment, this is where developer financial promotions in the form of 20%-80% and 10%-90% deals came in and changed the picture. Apartment buyers have been given the opportunity to purchase an apartment with low equity, and will only need to pay the full amount with a mortgage in an average of six years (according to chief economist review) when these apartments are completed. Developers took advantage of the premium terms of these promotions to sneak in price increases, which they offset through these promotions.

Published by Globes, Israel Business News – en.globes.co.il – on January 16, 2025.

© Copyright Globes Publisher Itonut (1983) Ltd., 2025.