Tel Aviv, Jerusalem Housing Prices Decline as Mortgage Borrowing Drops

The Central Bureau of Statistics (CBS) released new figures this week, which showed that after recording sharp increases for a period, there was just a 0.1% rise in housing prices from December 2022 to January 2023.

This saw the year-on-year inflation in the market climb to 14.6%, as opposed to the same period a year earlier.

Housing prices

There was a 20.3% rise in September and October 2022 from the same period a year earlier, which was the sharpest rise recorded in housing prices.

However, the most recent report from CBS showed that there was an increase of just 0.5% from October 2022 to January 2023.

As a matter of fact, the high demand areas in Tel Aviv actually recorded a fall in prices by about 0.5%. The same was true for Jerusalem and Haifa that recorded declines of 1.1% and 0.9%, respectively.

Central Israel, excluding Tel Aviv, recorded an increase in price of about 1.3%. This stabilization comes when real estate transactions have recorded a sharp decline as opposed to the previous year.

Reports from the Bank of Israel and Chief Economist of the Finance Ministry were also released this week and they showed a consistent fall in mortgage borrowing as well.

The fall

According to the report from the Finance Ministry, the total number of homes sold in January stood at just 7,093, which was a year-on-year fall of 39%.

It is also the lowest number of transactions recorded in the month of January after 2009. The report said that the decline was similar to the decreases recorded in April 2022 when the interest rate was first hiked by the central bank.

As of February, the interest rate has now reached 4.25%, which means the cost of borrowing has risen, with interest on home loans being somewhere between 5.5% and 6.5%.

Only one-third of the expenses can be used for mortgage payments in accordance with the controls imposed on housing loans, which reduces the amount that people can borrow.

Other factors

In recent years, there have been sharp rises in price as opposed to wages and this means that affordability of potential buyers has been reduced.

The central bank revealed that February 2023 saw mortgage loans drop to a low of four years, as homeowners borrowed just NIS 5.7 billion.

This was a fall of 50% from the same month last year when the borrowing had stood at NIS 11 billion. The number was also lower than the mortgage loan numbers in January, which stood at NIS 6.4 billion.

Bank figures show that the last time mortgage borrowing had come close to NIS 5 billion, other than during the beginning of the pandemic in April 2020, had been the last couple of months in 2019.

The report from the Finance Ministry showed that housing prices were becoming stable, but there was a more rapid decline in the cost of apartments as opposed to prices for second-hand apartments.

There is a decline in sales all over the country. Even though Tel Aviv saw extensive ongoing development, the total number of new apartments sold in January stood at 141.