Housing Price Index Data Due, Potential for Unexpected Stability
Translated & summarized from Ice by baba
Israel's housing price index for August and September is due for release, with analysts expecting a slight decrease of around 0.3%. September saw fewer transactions due to the holiday season, while August was a stronger month. A potential surprise could be index stability despite falling actual prices due to financing benefits. Overall, housing prices have seen modest declines over the past year, failing to erase significant gains from previous years, while the second-hand market shows notable weakness.
The story in 5 lines · by baba
- Israel's August-September housing price index is expected to show a moderate decline.
- September's holiday season led to fewer real estate transactions, impacting the index.
- Financing benefits may cause the index to appear stable despite falling actual prices.
- Housing prices have fallen modestly over the past year, not erasing prior gains.
- The second-hand housing market is experiencing significant weakness and reduced investor activity.
The housing price index for August and September is set to be released this evening. September, a holiday month, saw a low number of real estate transactions, raising questions about its impact on prices. Historically, a low transaction volume can sometimes lead to price increases, especially when luxury market deals skew the average upwards. Last week, the Central Bureau of Statistics and the Ministry of Finance's chief economist released transaction data for September and the third quarter, focusing on trends rather than prices.
The previous index, published on October 15, showed a 0.6% decrease in housing prices for July-August compared to June-July. Annually, prices have fallen by 1.8%, with the Central District experiencing the steepest decline at 2.7%. Excluding government-subsidized apartments, new apartment prices dropped by 0.8%, approximately NIS 20,000 per unit. The article suggests the actual decrease is larger, masked by financing benefits. This downward price trend has been ongoing, with annual drops of 0.9% in December-January and 1% in April-May, the sharpest in eight years.
However, the recent declines are modest compared to the cumulative 26.8% rise in housing prices between the summers of 2021 and 2026. The annual inflation rate stands at 1.6%, meaning real housing prices have decreased by about 3.3% over the past year. The second-hand market shows a significant weakness, with a 16% annual drop in transactions and a nearly 30% decrease in investor activity.
Looking ahead to the new index, a moderate price decrease of around 0.3% is anticipated, influenced by the holiday season's impact on sales. A potential surprise could stem from financing benefits, which might keep contract prices high even as actual sale prices fall, leading to index stability. In such a scenario, prices might fluctuate by no more than 0.1%. August, a stronger month with 17% more transactions, could also moderate the expected September decline, resulting in a more balanced index.
Looking towards October, a 0.2% increase in the price index is forecasted, likely driven by rising rental prices, which constitute about 27% of the index. While rising rents can eventually boost demand for purchasing, this effect is long-term. The article notes that interest rates are expected to remain stable for another year, which could significantly impact the market. The turning point, when rising rents prompt more public purchasing, remains to be seen.
