Israel's Housing Market Faces Supply Shortage Despite Official Data

Recent data from Israel's Central Bureau of Statistics (CBS) reveals a concerning trend in the housing market: while official figures may suggest an increase in supply, actual construction completions are declining, and new construction starts have also fallen. This contradicts previous government reports and indicates that contractors are building less, with some delaying permit acquisition. The article argues that this reduction in supply, coupled with a stable or increasing demand, particularly in a lower interest rate environment, is driving up housing prices.

Specifically, in the second quarter, new construction starts dropped by approximately 10%, and completions by nearly 14%. Annually, new construction starts decreased by 7% to 76,000 units, or 70,000 net units after accounting for demolitions. Although annual completions saw an 8% rise to 61,000 units, this falls short of the strategic housing plan's target of 65,000 completions by 2026. The article criticizes the state for not meeting its own housing targets and suggests that large projects like those at the former Sde Dov airport contribute to a high number of unsold units that won't be ready for occupancy for several years.

The Planning Administration shows strong performance in planning but weak execution. In Tel Aviv, nearly 7,000 building permits were issued this year despite around 10,000 unsold apartments, many of which are in dilapidated buildings in southern Tel Aviv. The article suggests this oversupply in specific areas contributes to falling prices there, while Jerusalem sees price increases possibly due to sentimental buyers. Nationally, while many permits are issued, a significant portion are not acted upon due to reasons like the war or high interest rates, explaining the gap between construction starts and completions.

Politicians are making promises about housing prices, but no party has proposed a dedicated housing cabinet focused on price reduction. The article speculates this inaction might stem from reluctance to confront insurance, financial, and retail companies increasing their real estate holdings, or a preference for revenue from property taxes. A positive note is made about the Bank of Israel Governor, Professor Amir Yaron, for maintaining high interest rates during wartime, curbing inflation to 1.5%, and gradually lowering rates, offering a glimmer of stability amidst the housing market's underlying issues.