Encouraged by Israel's growth figures for 2009, Bank Leumi has raised its GDP growth forecast for 2010 to 3.5% from 2.7%. The move comes after the Central Bureau of Statistics announced earlier this week that GDP rose by 0.5% in 2009, well above the pessimistic forecasts of the Bank of Israel at the beginning of the year, which projected GDP contraction of 1.5%.
Bank Leumi economist Eyal Raz said, "We expect improvement in all GDP components in 2010. We expect private consumption to expand more rapidly than in 2009, although it will still be less than the long-term average. We expect private investment to stabilize after last year's fall. We expect growth in both imports and exports following the sharp contraction in 2009, thanks to renewed growth in global trade as the global economy recovers from the financial crisis."
Raz expressed surprise at the steady rise in home prices since early 2008, despite the recession. Today he said that the Israeli real estate market is beginning to cool down. "There has been some slowing down in sales of new privately-built apartments in recent months," he said.
The Central Bureau of Statistics reported that demand for new homes fell by 8% in November 2009. Potential homebuyer are apparently voting with their wallets following the 36% rise in home prices since the beginning of 2008 and 14% rise in January-November 2009 reported by the Ministry of Finance. Investors, who have been an important part of the homebuyers' market in the past year, are also withdrawing from the real estate market as stock prices and the interest rate rise.
Raz says, "We believe that demand for apartments will fall this year because of the interest rate hikes and discovery of alternative investments, two factors which underpinned the rise in demand for apartments last year. We also expect the supply of apartments to increase in view of the expected growth in housing starts and the shortening of construction time. The growth in supply and the weakness in demand will likely ultimately stem the rise of apartment prices, and may even lead to a decline in some parts of the country."
Published by Globes [online], Israel business news - www.globes-online.com - on January 7, 2010
© Copyright of Globes Publisher Itonut (1983) Ltd. 2010