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Despite the fall in the number of homes sold in Israel, housing prices continue to rise. Housing prices rose 2% in May-June compared with April-May and have risen 17.8% over the past 12 months, up from 15.9% last month, the Central Bureau of Statistics reported. According to the Israel Builders Association, there is no contradiction here because the problem is not demand but the under supply of housing.
63,900 homes were sold in the first half of 2022, down 10% from the first half of 2021, according to the Chief Economist at the Ministry of Finance. Furthermore, as the year has progressed the fall in the number of deals from last year has widened. In June 2022, 10,500 homes were sold, 24% down on June 2021. At the same time, 23,800 new homes were sold in Israel in the first half of 2022, down 11% from the first half of 2011, the Central Bureau of Statistics reports.
The current stagflation and the three hikes in interest rates since April make a cooling of the housing market logical.
Regarding the supply of new homes, this has been stable over the past few years. According to the Central Bureau of Statistics, in 2020 the inventory of new homes fell below 50,000 and has since moved between 42,000 and 48,000 and is currently 47,000. Housing inventory has been boosted by building starts, which totaled 69,000 at the end of March 2022, the highest figure since the 1990s.
Nor is this the entire picture. The Chief Economist at the Ministry of Finance found that over the past year there has been a rise in people buying homes 'on paper' - in other words for which construction has not yet begun. These figures do not feature in either the building starts or new homes sales data. This is not a negligible number either because since August 2021, 50% of homes bought from building contractors on the open market were 'on paper' and this proportion rose to 60% in June 2022.
With a dramatic fall in the sale of housing for investment since purchase tax was raised last year, the inventory of homes for rent is dwindling very fast, putting up rents. In the first half of 2022, investors sold 18,000 homes and only purchased 14,000, 30% down on the first half of 2021, according to the Chief Economist at the Ministry of Finance.
