Title: Declining Interest Rates and Sales Cause Entrepreneurship Projects to Decrease, Says Report
Introduction:
A recent report by the Central Bureau of Statistics reveals a significant drop in construction starts, marking a three-year low, as high interest rates and declining sales deter entrepreneurs from pushing forward with new projects. Additional data collected by Madeleine website, comparing building permit applications in 16 cities across the country between the first half of 2022 and 2023, further confirms the trend.
Decrease in Building Permit Applications:
Madeleine’s data shows a substantial decrease in the number of building permit applications submitted by entrepreneurs in the first half of 2023 compared to the same period in 2022. Across the 16 cities surveyed, there was a 44% decrease in the number of projects and a 28% decrease in the number of housing units requested in these applications.
Cities Affected:
Major cities like Jerusalem, Tel Aviv, Haifa, and more experienced a decline in both the number of projects and housing units applied for. In Tel Aviv, there was a 43% decrease in project applications and a 48% decrease in housing units requested. In Haifa, application numbers decreased by 56% and the number of units by 70%.
Positive Growth in Some Cities:
The report also highlights a few cities that experienced growth in building permit applications. Rishon Lezion, Bat Yam, Ra’anana, and Ofakim all showed an increase in applications and the number of units requested. This growth can be attributed to factors such as a lack of projects in 2022 and changes in development plans.
Reasons for the Decline:
The head of the research and information department at Madeleine, Ram Gefen, suggests that high interest rates and uncertain economic and political situations are major factors contributing to the decline in applications. Entrepreneurs are wary of the economic feasibility of projects and are hesitant to invest in an environment with low sales rates. This trend is expected to lead to lower construction starts and a potential increase in housing prices when demand eventually returns.
Discrepancies in Data:
While Madeleine’s data provides a comprehensive picture of the decline, it is important to note that the data collected from municipalities does not fully match with Madeleine’s findings. Variations in data can be attributed to factors such as delays in updating municipal websites and differences in how housing units are counted in permits.
Conclusion:
The report by Madeleine highlights the significant decline in building permit applications across major cities in Israel. The reluctance of entrepreneurs to initiate projects due to high interest rates and low sales rates, coupled with political and economic uncertainties, has resulted in a cooling effect in the construction industry. While there are discrepancies in the data, the overall trend suggests a decrease in construction starts, which may lead to a potential increase in housing prices in the future. The complete data findings will be presented at the Eilat Real Estate Center 2023 conference in November.