"If the Central Bureau of Statistics labor market figures are correct, policy-makers have a reason to worry that home prices are liable to swell to bubble level. The drop in the unemployment rate, the low interest rate, the rise in housing demand, and the fall in the housing supply, support higher prices. The increase in mortgages is also worrying," says DS Apex chief economist Alex Zabezhinsky. He adds, however, that the data for July and August were affected by seasonal demand and the postponement of the VAT hike.
Zabezhinsky noted the numerous data published last week which point to a substantial strengthening of demand for housing, a reduction in housing supply, the drop in housing starts, and the record mortgages in July and August. He said that the jump in purchases of new homes was liable to be transitory as the economic slowdown continues.
"The supply is shrinking, as reflected in the decline in the inventory of new homes for sale and the monthly increase in new homes coming on to the market," says Zabezhinsky. He adds that the number of housing starts plummeted in the second quarter, along a fall in commercial space building starts. "This situation may indicate an economic slowdown, as well as the saturation in business space," he says.
Commenting on the all-time high in new mortgages taken in July and August, Zabezhinsky says, "The increase in mortgages corresponded with an increase in the proportion of loans with a loan-to-value (LTV) of over 60%, and a rise in the average mortgage. It seems that homebuyers in recent months were relatively high income-earners who bought mid-range properties at high leverage."
Published by Globes [online], Israel business news - www.globes-online.com - on September 3, 2012
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