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Israel Real Estate in Numbers Q2 2021

TL;DR

The numbers from the Central Bureau of Statistics are now out. The average home transaction price in Tel Aviv in the second quarter of this year was over NIS 3.5 million, 20% more than two years ago. The Israeli housing market is booming almost exclusively in the big city. The price delta between central Tel Aviv and the rest of the country is widening, despite both being on the rise. Tel Aviv rose more rapidly. Supply is drying out and far outpaced by the soaring demand.

The numbers from the Central Bureau of Statistics are now out. The average home transaction price in Tel Aviv in the second quarter of this year was over NIS 3.5 million, 20% more than two years ago. The Israeli housing market is booming almost exclusively in the big city. The price delta between central Tel Aviv and the rest of the country is widening, despite both being on the rise. Tel Aviv rose more rapidly. Supply is drying out and far outpaced by the soaring demand.

On average, apartments are being transacted at a 10% premium than the same period last year. The average price of a small apartment of one to two rooms rose by 12% to NIS 2.42 million; prices of three-room apartments rose by a similar percentage, to NIS 3.2 million; while prices of four-room apartments rose by 14% within a single quarter, to NIS 4.28 million. Prices of five-room apartments interestingly fell, by 0.8%, to NIS 4.7 million.

The price difference between Tel Aviv and the neighboring Ramat Gan is now at an all-time peak of 54%.Versus Jerusalem, the gap has widened from 46% to 67%, and versus Haifa, from 139% to 200%, meaning that an apartment in Tel Aviv costs three times as much as an equivalent apartment in Haifa. The number of transactions, however, has significantly dropped in Tel Aviv. The supply drought is feeding the upward spiral as new permissions have dropped and land prices soared, thereby making it difficult for promoters to plan new projects.

According to the Central Bureau of Statistics, in May and June alone, 10,600 new homes were sold in Israel. That is more than half the total number of new homes sold in 2011, and almost half the total number sold in 2018. About 20% of it is explained by purchases in the subsidized Buyer Price program. In the first half of this year, more than 25,000 new homes were sold in Israel. That is a dramatic statistic because the rate of purchases of new homes is higher than the rate at which they are being built.
Within a year, the stock of new homes for sale has fallen by 30%, reaching about 36,000 at the end of June. Speculation is a factor, but demand from buyers-occupiers is the main driver for this price increase. Demographics, as well as the high demand for skilled high-tech labour, explain the brunt of this trend. Unlike most other economies, a tightening of the monetary policy is unlikely to hamper the meteoric rise of residential units in Tel Aviv in the foreseeable future.

Developers have caught onto the demand for new homes and have rushed to raise prices. The New Dwellings Price Index has risen by almost 6.5% in the past two months, which compares with a 7.7% annual rise in prices of all homes. Another important statistic in this context is the Building Inputs Price Index, which is rising at an annual rate of 6-7.