Apartment prices will rise this year by 6% -8% – real estate

I do not dispute the reliability of the data of the professional rating company S&P Maalot regarding what has been in the housing market in the past year. However, I certainly disagree about the analysis of the data and especially about the forecast for the coming years.

First of all, the S&P Maalot data, similar to the recently published CBS data, indicate a 4 percent increase in housing prices over the past year. This is, indeed, a true average rate, but an average is a term from the world of statistics, and statistics are known. ” The most true lie. “Do these data not include the discounted apartments marketed this year as part of a price-per-tenant program, which artificially lowered the average? According to the data I have, new apartments sold in 2020 in typical cities such as Ramat Gan and Bat Yam have risen. At a much sharper rate of 19 and 12 percent, respectively, indicating a very strong occupied demand trend in the housing market and ostensibly a price increase of more than 4 percent in 2020.

Second, the S&P Maalot forecast for the next two years for the housing market, causes me significant doubts, whether this is not an overly optimistic forecast. According to the forecast, price levels will continue to rise in 2021 by about 4 percent, a result of the lack of supply in the housing market and a recovery, at least in part, from the corona crisis. Later, in 2022, the rating company expects a significant moderation in the price increase to only 2.5 percent, as a result of saturation in the purchasing power of the Israeli public that will not yet recover from the economic crisis and a realistic possibility that mortgage banks will tighten mortgage terms.

Well, according to the data I have, which relate to both 2020 and the first quarter of 2021, which is not yet over, a more significant price increase is expected in 2021, in the range of 6 to 8 percent, as a result of 3 main factors:
First, the current situation of lack of supply in the housing market will not change and even worsen, a result of very lengthy procedures of land thawing, obtaining permits, bureaucracy and very lengthy construction procedures. Only in 4-5 years, at best, there may be a change.

Second, paradoxically, the corona plague has created even heavier pressure on housing developers who want to upgrade their homes, and see a larger apartment with a balcony or garden as a “protected capsule.”

Thirdly, the very low interest rate on mortgages, easy and material The latest installation of the Bank of Israel, which allows for a two-thirds mortgage linked to the prime, will fuel the mortgage market and demand, while in practice the sparse supply remains intact.

Moreover. The particularly high natural increase in the State of Israel, plus an increase, adds about 60,000 single-family homes each year, a total of 180,000 people in total, which will only increase the existing pressure on the housing market in the coming years. And the question is – are we expected to return to the dizziness of housing prices, as it was during the decade 2006-2016? Well, the prophecy is known to have been given to fools, however, and this is a large hall, this is unfortunately a scenario that is quite possible and not at all surprising and especially if during the two consecutive years 2021 and 2022 housing prices rise by 6-8 percent each year.

* The author of the article, Erez Cohen, is an appraiser and lawyer, former chairman of the Real Estate Appraisers’ Chamber