© Shutterstock Are apartment prices on the way to slowing down? “Scope of construction starts on the rise”
| Sonia Gorodisky, Israel Hayom |
After real estate prices soared in the last year at an unimaginable rate of more than 20%, the chief economists of the major banks are rather optimistic about the continuation. According to the forecast of the three major banks, Bank Hapoalim (TASE:), Leumi (TASE:) and Discount (TASE) :), in the new year not only will the rate of increase moderate but there may be price decreases. Together with the marketing data of the Israel Land Authority, which will be ripe in a few years for new apartments, there are good reasons for cautious optimism.
“The rate of increase in apartment prices is expected to moderate significantly in the coming months, and there may also be price decreases in 2023,”
Leumi’s capital markets division, headed by Dr. Gil Michael Bafman, says that Leumi notes that the cumulative annual volume of construction starts as of the end of the third quarter amounted to approximately 69.6 thousand apartments – high in relation to the economy’s annual housing needs, which are 55-60 thousand apartments .
“The volume of construction starts is on the rise, and the volume of construction completions is recovering from the negative effects of the corona crisis. Simultaneously with the increase in the supply of residential real estate, the demand for the purchase of apartments is on a downward trend from the beginning of 2022. This is, in part, against the background of the change in the macro environment Economically, with an emphasis on the rapid increase in the Bank of Israel’s interest rate and the acceleration of inflation, as well as the reduction in the scope of activity of real estate investors following the increase in the purchase tax at the end of 2021.”
We received a similar forecast from Bank Hapoalim. According to the bank’s financial markets strategist, Modi Shafferer,
“We estimate that the sharp drop in demand levels, as reflected in the mortgage data, in addition to the increase in supply (a sharp increase in the volume of construction starts and permits and the increase in the inventory of new apartments for sale) and the very sharp increase in interest rates on mortgages – will lead to a halt in the increase and even a slight decrease.”
says Shaffer.
Discount Bank also believes that in the new year the trends in the real estate market may reverse. Nira Shamir, Chief Economist of Discount Bank, said that
“In October there was a sharp drop in the sale of new apartments. We continue to estimate that in 2023 we will see a moderate price drop.”
Read the full article on the Israel Today website