Meitav: The tremendous increase in building starts and finishes is a sign that real estate prices will decrease.
"This week, data was published about the domestic real estate market that show a real potential for cooling down in the sector, mainly referring to apartment prices," claimed Meitav Investment House chief economist and strategist Ron Eichel, in a survey. Eichel is referring to data regarding building starts and finishes in the first quarter of the year that were published last week, and predicts that the real estate apartment market will be flooded within two years. Eichel expects prices to even out and perhaps even to decrease.
Sources at Meitav forecast that the supply of apartments will increase within two years, a claim that is based on data regarding building starts and finishes in the first quarter of 2011, which were published last Tuesday. "The number of private building starts means that prices may have reached their peak," the summary stated. "The number of building starts surpassed 10,000 units in the first quarter, in other words, a rate of 40,000 units a year." In conjunction with public sector building, the national rate of building starts is about 44,000 apartments a year.
Meitav sources also believe that, according to current rates of building starts and finishes, the real estate market is expected to flood within the next two years, at levels similar to those last seen in 1999-2000. "Over the last twenty years, the length of time needed to complete an average apartment is between 22 and 26 months. In other words, the number of building finishes expected in the next two years is extremely high."
Decrease in demand for apartments
Meitav also notes that there was a decrease in demand for apartments in April, which they believe is indicative of an overall decrease in demand, which could be a stabilizing factor in the market: "The central area (excluding Tel Aviv) continues to draw our attention, since it comprises about a third of all real estate activity. In general, the numbers indicate that over the last few months, there has been a decrease in demand for apartments," the survey concluded.
Published by Globes [online], Israel business news - www.globes-online.com - on June 5, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011
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