Is the hous­ing bub­ble fi­nally about to burst ?

The Jerusalem Post - - NEWS - • By SARAH LEVI

Over­all hous­ing prices in Is­rael saw a barely no­tice­able drop of 0.1% over the past 12 months, ac­cord­ing to a re­port re­leased on Tues­day by the Cen­tral Bureau of Sta­tis­tics.

In an in­ter­view with Army Ra­dio on Thurs­day, Fi­nance Min­is­ter Moshe Kahlon at­trib­uted the de­cline to the mass pro­duc­tion of homes over the past year, not­ing that “con­struc­tion leaped from an an­nual av­er­age of 30,000 units built in pre­vi­ous years to 130,000 this year.”

Kahlon added that de­spite this move­ment be­ing a dif­fi­cult one to sway, “this is a trend that is just start­ing; there is no doubt that this num­ber will con­tinue to drop.”

The CBS re­port also showed that de­mand for new hous­ing has been on the de­cline for the past year and hous­ing prices have gone down by a cu­mu­la­tive 2.15% over the past five months.

The re­port also re­vealed a break­down of apart­ment prices by city and re­gion, show­ing a price in­crease of 1.2% in Jerusalem and 0.4% in the North and Haifa. On the other hand, hous­ing prices de­creased in Tel Aviv by 0.9% and by 1.5% in the South.

De­spite op­ti­mism from Kahlon over this data, those in the in­dus­try warn that this is not the whole picture.

Erez Cohen, for­mer head of the Is­raeli Ap­praisal As­so­ci­a­tion, told The Jerusalem Post: “Min­is­ter Kahlon and the Fi­nance Min­istry are mak­ing a mock­ery of ev­ery­one; what he is say­ing is not true and does not re­flect the real es­tate mar­ket ob­jec­tively.”

Cohen warns that the loss of in­ter­est by foreign builders and a sharp de­cline in over­all con­struc­tion will put Is­rael at risk of suf­fer­ing a re­ces­sion in the real es­tate in­dus­try.

“Foreign in­vestors – mostly Jews from Europe – are run­ning away from the mar­ket and tak­ing their projects else­where in the world,” Cohen said.

He added that “what Kahlon is do­ing is fo­cus­ing on the mass pro­duc­tion of cheap and sub­si­dized apart­ments in the pe­riph­ery that no­body wants. But the re­al­ity is that the mar­ket is in cri­sis and that many con­struc­tion com­pa­nies have been back­ing out of projects due to in­sta­bil­ity in the mar­ket and in the gov­ern­ment.”

Cohen sug­gests that we should fo­cus on build­ing homes for the mid­dle class and en­cour­age foreign in­vest­ment as a means of stim­u­lat­ing the mar­ket while re­duc­ing prop­erty taxes.

“If Kahlon doesn’t change his cur­rent pol­icy, we will go into a re­ces­sion,” he warned.

How­ever, Kahlon sees the over­all drop re­flected in the CBS re­port as a vic­tory for young cou­ples search­ing for an op­por­tu­nity to own a home in Is­rael.

Kahlon said in a state­ment re­leased on Wed­nes­day: “At first ev­ery­one said that this was im­pos­si­ble – the hous­ing mar­ket was in flames and there was no chance that any­thing could im­prove – but we did it.

“This isn’t my vic­tory or any­one else’s – this is a vic­tory for young cou­ples, who af­ter so many years are fi­nally able to af­ford a home of their own,” he said.

“And to all of the skep­tics who at­tacked us for the past three years and said this couldn’t be achieved, I sug­gest you come to terms with this new re­al­ity – the hous­ing mar­ket has re­laxed and prices will con­tinue to fall,” con­cluded Kahlon.

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