"Israel’s housing market is poised for a hard landing, despite two recent Bank of Israel interest-rate cuts," says "Global Property Guide" in a review of the Israeli market, and changes in home prices, rents, home sales, and mortgage interest rates over the past decade.
"The slowdown has hit," says "Global Property Guide" about home prices, noting that after a 22.4% rise in homes prices in 2009 and 17% rise in 2010, prices fell by 3.27% in the third quarter of 2011, compared with the preceding quarter – the second consecutive quarter in which prices fell, after an 0.83% drop in the second quarter. "Property prices in Israel are expected to continue falling in the coming months, and construction activity is expected to contract sharply," it adds.
The average apartment price was NIS 1,081,100 ($284,941) in the third quarter.
After sluggish growth of 19% in 1999-2007, compared with a 24% rise in the Consumer Price Index (CPI) over the same period, the rise in home prices over the past three years has raised questions of whether Israel is now experiencing a housing bubble, says "Global Property Guide". It cites three reasons for the rise in prices in 2008-11: a low interest rate environment; demand which outstripped supply; and the increased activity of buyers groups. This is one of the few times that the latter factor has been mentioned by a foreign publication.