The continuous drop in the number of apartments sold in the last six months took some time to be reflected in the prices, but this month it happened. This time the housing price index showed the smallest monthly increase recorded in the last two years, and new apartments even saw a decrease.
Are we at the beginning of a new era in the real estate market? It’s definitely possible.
The year 2022 broke records in terms of the price of housing, but the slowdown in the volume of transactions and the interest rate increases in recent months led, in the end, to a moderation in price increases. After the records were broken in recent months with annual increases in apartment prices at a rate of over 20%, the housing price index of the Central Bureau of Statistics for the months of November-December showed a monthly increase of only 0.2% – the lowest increase in the last two years, which led to a decrease in the annual rate to 17.1%
Rent prices increased in January by 7.9% in apartments where a tenant was changed
Inflation rose to 5.4%, the slowdown in the rate of increase in apartment prices continues
Despite this, it was the most severe crisis year in a long time, both in terms of price levels (as evidenced, in the fourth quarter of the past year the average price of an apartment rose by 11% compared to the corresponding quarter of the year before); And in terms of the slump in demand for housing, as was well reflected in the data of the chief economist at the Ministry of Finance and the data of the Central Bank published this week, regarding the volume of sales of new and second-hand apartments.
Although in an annual calculation, in 2022 there was an increase in the number of apartments sold to the general public compared to 2021 to about 110 thousand housing units; However, it is impossible to ignore the significant decrease in the second half of the past year, which led to a drop in the rate of sales by more than 40% compared to the second half of 2021, alongside the fact that in April the Bank of Israel began raising interest rates in the economy, thus making housing loans very expensive and cooling the market .
According to Treasury data, last December only 7,132 apartments were sold – the lowest figure for this month since 2008. The number of transactions in the second half decreased by 42% compared to the previous year, mainly in Tel Aviv and the center. This is not surprising: according to the housing price index, Tel Aviv is the leading city in the highest price levels in the past year, with an average amount per apartment of more than NIS 4 million in the fourth quarter, which probably kept buyers away.
The stagnation in sales led to a record of at least three years in the supply of the new apartments that are on the shelf and have not yet been sold, and the buyers understood this very well. On the ground, you see fewer buyers rushing to sign a contract, while the contractors are also feeling the slowdown and are selling apartments on paper at discounts, under the umbrella of special benefits and early sales days. Against the background of the interest rate hikes, which make not only the mortgage repayments but also the means of financing more expensive, the cooling of the market, as mentioned, did not escape the new apartments, and although the contractors managed to sell quite a few apartments, their cash flow nevertheless shrank.
Will the recession in the rise in apartment prices continue into 2023 and perhaps also lead to price drops, as many analysts have estimated in recent months? The continuation, of course, is not certain, but if we rely on the CBS data regarding new apartments, which showed a decrease in the last two months of the year, and on the review of the chief economist at the Treasury, who presented initial data for the month of January according to which the decrease in the volume of transactions continued; and if the Bank of Israel continues the trend of increases The interest rate – it is quite possible that this will be the picture of the situation.
