Sunday, March 17, 2013

Home prices up 1.7% in January

The real estate market is continuing to heat up. Home prices rose by 1.7% in January 2013, the biggest monthly gain since June 2010, according to Central Bureau of Statistics data published on Friday. The Bank of Israel takes account of the Central Bureau of Statistics' Prices of Dwellings Index when deciding monetary policy.

January was the seventh consecutive month in which home prices rose; the cumulative gain was 6.8%. January was also the third consecutive month in which home prices rose by 1% or more: the rise was 1% in November 2012 and 1.1% in December. At the Bank of Israel Monetary Committee in late February, members expressed concern about the rise in real estate prices. The minutes of the meeting, published last week, state, "Home prices have continued to increase at a rapid rate in recent months. Committee members emphasized that monetary policy acts primarily on the demand side, while the required steps are supply-side steps that have the ability to lead to an increase in the inventory of homes while reducing prices, and such steps are not expected before the new government is constituted and the budget is passed."

Home price rose by 8.5% in the 12 months through January, and have risen by 77.4% since the surge in prices began in May 2007.

In the rental market, meanwhile, the average rent in Israel rose 4.9% in 2012, according to the Housing Ministry. The sharpest increases in home rental costs were felt in Tel Aviv, to an average of NIS 4,790 a month, where they rose 6.7, and in the southern region and Haifa’s northern suburbs, where rents were about 7% higher than in 2011. Since January 2008, the cost of renting in Tel Aviv has soared 50.3%. In the Gush Dan region and the Sharon, the rise was nearly as steep at 48.4% and 47.4%, respectively. The national average over the five years was a rise of 42.7%, ministry figures showed.

Behind the sharp rise in rents is the rise in home prices in recent years. Property investors, who had grown accustomed to returns of 8% and 10% on homes they rented in cities like Be’er Sheva today are getting return closer to 5% and need to raise rents just to meet this benchmark. The outlook for rentals is for more increases because the number of investors buying homes is shrinking, putting pressure on the supply of rental apartments. Last year, according to treasury figures, they accounted for only 23% of all purchases of homes, down from 30% in 2009.

In terms of the number of monthly salaries it takes to buy a home, the figure remained unchanged in 2012 from the year before at 131. However, last year’s figure comes after a steady rise in previous years, from 103 months’ salary in 2008 to 116 in 2009.

Source Globes

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