Will real estate prices in Israel go up or down in 2011?
This seems to be a question that not too many people, government agencies in Israel and or institutions can agree on.
Bank Leumi has predicted that home prices in Israel, will rise by 5 to 10% in 2011. Their basic premise is that in spite of efforts to increase the supply of apartments, the bank believes that demand will still outstrip supply in the near future. Because Bank Leumi expects the inventory of homes for sale to remain low and interest rates to remain low as well, they are projecting the continued rise in prices, although at a much more moderate rate than the last few years.
On the flip side of the coin, the Bank of Israel made statements earlier this month that they believe recent measures taken by the Israeli government, will help bring prices down somewhat. Two of the measures they pointed to specifically were an increase of the Purchase Tax on Investors buying apartments for the next 2 years as well as an exemption on the Betterment Tax for those who own an Investment apartment that they would be willing to sell in 2011 or 2012. The premise here is that less Investors will be in the marketplace and more Investors will sell properties they recently purchased, thus increasing supply.
Bank of Jerusalem CEO Uri Paz recently stated that he believes prices will stabilize in 2011. He points to the slight rise in interest rates that are expected this year, which will lessen the appeal of Investor purchases. Paz stated that during the peak of the market, as much as a third of the mortgages the bank was providing were to Investors.
An article that just appeared at Jpost.com reports that according to Israel's Finance Ministry, “The weight of investors in the real-estate market increased significantly during the month of December 2010, representing close to a third of all transactions – similar to the peak level registered in the third quarter of 2009 – after almost continuously declining since the last quarter of 2009.” The Finance Ministry suggests that the rise in Investor purchases in December was in order to avoid the new higher taxes on Investor Purchases scheduled to take effect in on the first of this month. “Looking ahead, we expect a sharp fall in the number of purchases of apartments for investment in the first months of 2011,” the Finance Ministry said.
Source: Globes online, Jpost.com
January 31, 2011
