It appears that the red-hot housing market in Israel is finally slowing down. The Central Bureau of Statistics (CBS) disclosed a new report this week on new home sales.
The report showed that there was a 9.9% drop in the sale of new homes between May and July, as opposed to the last three-month period. After seasonal adjustments, this figure stood at 10.9%.
Home sale numbers
There were 10,520 apartments sold in this duration out of which 22.6% were part of the housing schemes subsidized by the government, such as ‘Mehir Matara’.
Between February and April of the year, the total number of apartments sold had stood at 11,750. The home sale numbers of July alone show a drop of 5.3% as compared to June numbers.
More than 400 housing units had been sold in Jerusalem, Tel Aviv-Yafo and Netanya between May and July.
The previous quarter had recorded meaningful growth in the number of properties that were sold in Afula, Bnei Brak, Eilat, Dimona, Ramat HaSharon, Or Yehuda, Bat Yam and Netanya.
However, there had been a considerable decline in sales in Harish, Petah Tikva, Ashdod, Beersheba, Rishon Le’Zion, Beit Shemesh, Ramat Gan and Ashkelon.
There was also a decline in the number of home sales in Tel Aviv-Yafo, but only by 2.6%.
Price increases
This apparent slowdown is primarily because of a rise in prices, as less people can afford to buy new homes.
On Thursday, the new housing figures that CBS released showed that even though prices are still going up in most areas of the country, there was a slight slowdown in rate.
In May-June, the rise in prices had been 2%, but June-July saw it come down to 1.3%, which means that the annual increase in price is 17.9%, as compared to the same period in the previous year.
Israel’s central region recorded the fastest rise in annual prices, as June-July saw a 20% rise as opposed to last year.
The Haifa area saw an 18.3% rise, 16.9% for northern Israel, Tel Aviv and its surroundings saw a rise of 16.5%, 16.1% for southern Israel and the Jerusalem Area saw an increase of 15.7%.
Interest rates
Another reason for a slowdown in housing sales is because of higher interest rates because new mortgages are affected because of them.
Earlier this month, mortgage borrowing experienced a slowdown as per the Bank of Israel, even though price hikes had pushed up the average mortgage loan.
The central bank had delivered the biggest interest rate increase last month in two decades, as it rose by 0.75 points to reach 2.0%.
This is because the rate of inflation in Israel had climbed to 5.2% in the last 12 months. July saw yet another increase in the interest rate by 75 basis points.
It is expected that rates will continue to rise, which means monthly mortgage payments that are tied to the prime rate will also continue to go up.
In the coming days, CBS and the central bank are expected to provide additional reports.