Israel's housing price rises have gained renewed momentum, and unlike previous months, when most of the increases came from second-hand apartments, in the last few months of 2024 a change in the trend became evident, with most of the increases recorded in the prices of new apartments. Apparently, the increase came in parallel with the increase in financing operations by contractors.
The figures released yesterday by the Central Bureau of Statistics show that housing prices in Israel rose by 0.6% between September-October 2024 and October-November 2024 and rose 7.8% in the year between October-November 2023 and October-November 2024.
New tenants are paying an average 4% more in housing rents than the previous tenants, while new leases for contract renewals increased by 2.6% over the past year. The Housing Services Index, which reflects the rental market, rose by 0.5% in November 2024, and by 3% in the past year.
Where did prices rise the most?
Housing prices rose in all six districts, with the Tel Aviv District being the main driver of the increase in the index, rising by 1.2%. The Jerusalem, North and Central districts recorded increases of 0.4%, while the lowest increases were recorded in the Haifa district (0.3%) and southern (0.2%) districts.
However, when looking at the indices on an annual basis, the leading districts in terms of price increases are Haifa, where apartment prices rose by 11.7%, the North with an increase of 10.2%, followed by the Tel Aviv District which recorded an increase of 8.8%, Center (7.9%), South (5.2%), and Jerusalem which recorded an unusually low annual increase of 0.6%.
Does the current index reflect what is happening in the market after the ceasefire in the North?
No. The ceasefire in the north was signed at the end of November, and therefore it is likely that only the next two indices will reflect the changes in the markets following the ceasefire. In our assessment, the large price increases recorded in the northern region mainly reflect increases in the prices of second-hand apartments with a security room, while most of the apartment supply in the two northern districts includes older apartments.
Which prices rose more? New apartments or second-hand apartments?
After a long period in which most of the price increases were recorded in second-hand apartments, we see a change, which is not reflected in the official Central Bureau of Statistics figures but in other figures.
If we focus on the price changes experienced by new apartments in the free market, it appears that they rose by about 2% over the past two months, while the overall index rose by about 0.8%.
Why does this happen when the supply of apartments is at its peak?
According to the Central Bureau of Statistics, the supply of apartments today reaches a record of 71,000 apartments, which should have put pressure on the decline in apartment prices. In our assessment, this is where the developers' financial promotions in the form of 20%-80% and 10%-90% deals came in and changed the picture. Apartment buyers have been given the opportunity to purchase an apartment with low equity, and will only need to pay the full amount with a mortgage in an average of six years (according to the chief economist's review) when these apartments are completed. The developers took advantage of the excellent terms of these promotions to sneak in price increases, which they compensated for by these promotions.