Modi Shafrir, the chief strategist of Mizrahi Tefahot (photo by Ilan Bashor)
Modi Shafferer, the financial markets strategist of Bank Hapoalim and one of the senior economists in the capital market, says today that the rate of increase in apartment prices will moderate as early as next year and this is a first assessment of a significant factor in the market that should be paid attention to.
Shafferer says that despite the considerable moderation in demand levels in recent months, and the certain increase in the supply of apartments – apartment prices continued to rise sharply in the last month (increased by another 1.3% MoM and about 17.9% in the last year).
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“At the same time, the further moderation expected in demand in the coming year (against the cooling of the hi-tech market and the sharp increase in interest rates), combined with the increase in supply (inventory of new apartments and construction starts) and our assessment of the expected moderation in the rate of increase in the construction input index (in light of the drop in commodity prices) support With a noticeable moderation in the rate of increase in apartment prices in 2023,” he says.
As for the overall increase in prices in Israel, Shafferer says that “the index for the month of August decreased by 0.3% MoM – slightly below our estimate of a decrease of 0.17% (not rounded) and compared to the forecasters’ average expectations for a decrease of 0.10%. Inflation in the summary of the last year increased by 4.6% – Still significantly above the price stability target of the Bank of Israel.
“It is important to note that the decrease in the index in August was largely due to a sharp drop in fuel prices (-0.64% for the index), and the appreciation of the shekel which technically lowered flight prices (-0.14% for the index). On the other hand, electricity prices increased the index by about 0.18%.
“Despite the drop in the index in August, core inflation in Israel remains at a very high level and service inflation continues to be very high – a fact that supports continued interest rate increases on the part of the Bank of Israel – we estimate that the Bank of Israel will raise the interest rate at the next meeting by about 50bp and that the interest rate will rise to the level of About 3.50%. We note that before the publication of the index – the market priced that interest rate will rise in the coming months to the level of 3.75%.
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