Thursday, March 1, 2012

Confirmation of market uptick?

Bank Leumi warns that the rise in home prices could resume because of the decline in building starts, and the rise in rents, which might tempt investors back to the real estate market. The banks economists describe the rise in the supply of homes as “moderate”. ”The supply of unsold new homes remaining for sale has grown fairly moderately, because alongside the rise in demand that has taken place in the past two months, there has been a decline in the number of housing starts,” the bank says in its weekly macro-economic review released today. Housing starts totaled 43,648 units in 2011, compared with 40,505 in 2010. The average growth in the number of households in Israel is 39,000, but Bank Leumi points out that besides this “there is also demand from investors, from those seeking to improve their living standards, and from foreign buyers.”

In the final quarter of 2011, housing starts fell 13%, because of pressure on credit in the economy. “The fall in the rate of building starts, if it continues, is likely to lead once more to a considerable shortage in the supply of housing, and thus to renewed upward pressure on prices in the housing market, even in a situation of slowly rising unemployment,” the bank says in the review. Given low rates of interest and a public looking for investment alternatives, higher rents could tempt real estate investors back into the market: “Taking the high level of rents into account (rents rose 5.3% in 2011, compared with a 6.1% rise in new and secondhand home prices), potential apartment buyers are inclined to buy,” Leumi says.

Source Globes

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