January 27, 2023

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House Prices Keep Rising, Hitting a Record of 20.3% Increase in a Year

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On Thursday, the Central Bureau of Statistics (CBS) released the latest figures showing that new records had been established by house prices in Israel in the month of October.

This is due to the fact that they recorded a rise of 20.3% in the month, as opposed to last year in the same month.

This means that there was a 1.2% increase in prices during the month across sales of both secondhand and new homes.

The central and northern regions felt this rise the most, as the number stood at 22.5% in these areas.

The data

According to the data, there had also been a radical decline in the number of homes sold to levels not recorded in about 2 decades.

There was an 84% drop in the volume of property sales in Tel Aviv as compared to October 2021. In the past six months, interest rate has increased steadily, as it went from 0.1% to 0.35%.

The purpose of this rise is to control housing inflation by reducing the size of the available loans and boosting the cost of home ownership.

The Bank of Israel has already calculated that inflation for the month of October was 5.1%, which was above the 1% to 3% target range.

The central bank has also asserted that it will continue to hike interest rates for the next couple of months, until inflation is down to their target range.

The signs

However, there are some signs that economic pressures may be easing. There was a 0.2% reduction in the index of raw materials that are used for construction of residential properties in November.

But, there was no change noted in the index that is applicable to construction of office and commercial buildings.

This has a direct impact on the pricing of new houses, as their final cost is usually calculated in accordance with the changes in the cost of materials.

There was a 0.3% increase in the agricultural input index that has an impact on food production costs and there was also a 0.1% increase in the consumer price index (CPI) in the month of November.

This was primarily due to rises in the cost of food, home maintenance and housing, but is the lowest rise recorded in the last three months.

Other numbers

There was a drop in price of fresh fruit and vegetables by almost 4.3% in the same month and furniture and footwear also saw their prices fall by 0.3% and 1.5%, respectively.

There has been a 5.0% increase in the CPI since the beginning of this year. There has also been an increase in average salaries.

In August, the average monthly salary had reached NIS 12,285, which is the last month for which the salary data is available.

This indicates an increase in salaries of 4% from the same month last year, but it does not match the genera increase in prices, especially the rate of increase that has been seen in housing prices.

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