When Numbers Lie !

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It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way—in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only
A Tale of Two Cities , Charles Dickens (1859)

Are you curious about the state of the housing market? The latest data shows that dwelling prices have increased by a modest 0.3% between October and November 2022 compared to the previous month. But the real story lies in the year-over-year comparison, with prices skyrocketing a whopping 18.8%!

But don’t just take our word for it, check out the figures below to see the bimonthly changes in the dwelling price index over the past 12 months. You’ll notice that after a period of rapid growth, there has been a moderation in the rate of annual price increase. In fact, there was even a brief period of decline in 2018. The curve then turned hyperbolic, very much like the 2021 TESLA share price. But the analogy stops there. Despite tightening monetary policy, interest hikes, the meltdown of the high tech sector and the cratering value of once admired unicorn companies such as Pagaya , now looking more like Sancho’s Dapple than Alexander’s bucephalus.

The data we do not have yet though, without which the complete story cannot be told, is the volume of transactions. Those would number would paint another story altogether. With transaction down over 50% from the year before, any other rational market would have reeled. But that is not the case in Israel, just yet. The endemic supply dearth, exacerbated by the virtual disappearance of willing sellers, only adds to the phenomenon and the baffling continuing rise in prices.

Note that the significant previous moderation in the rate of annual price increase began in 2016 to the point of price decline in the last three quarters of 2018.

Growing Regional Wealth Gap

Well, the data shows that prices have varied between districts with Jerusalem seeing a 2.4% increase, Northern experiencing a 0.9% decrease, and Haifa seeing a 1.9% increase. See below for a breakdown of the price changes by district. The North, the South and the Center have already shown signs of capitulation. These are also the areas where the largest amount of land was released by the government for construction of residential units. Jerusalem and Haifa however show no sign of slowing down. Tel Aviv seems to be stabilizing at an average of 1% monthly increase.

New vs. Old

And what about new dwellings prices you might be wondering? Well, there’s a bit of a mixed bag. Prices for new dwellings decreased by 0.9% between October and November 2022, but when looking at the same period last year, prices have skyrocketed by 22.4%. Check out Figure 4 for a visual representation of the evolution of the dwelling price index vs. new dwelling price index over the recent three years. So whether you’re in the market to buy or just curious about the state of the housing market, our data has got you covered.

Prices of new dwellings increased by 22.4% with respect to the prices in the same period
last year, i. e., October 2022 – November 2022 compared to October 2021 – November
2021. Recent numbers however show a softening of the prices of new constructions. As expected, in light of the increased interest rates and the ensuing dried up liquidity, some promoters have had to accept lower offers.

In short, the latest compilation of real estate data are still depicting a very very strong market and again prove that the sheer resilience of the owners is defying all economic logic.

It should be noted however that the Israel Central Bank was one of the first to slow down the increase in the interest rates and banks have been outrageously (criminally one might even say) slow in passing through the interest rates increase down to the retail APR's, depriving homeowners from any alternative to holding their real estate.

Published May 8, 2023