Leumi: Home prices to jump if building starts keep falling

There were 46,000 building starts in the year ending in the first quarter of 2011, and 39,000 building starts in the year ending in the third quarter of 2012.

If the number of building starts keeps falling, within two to three years there will be a housing shortage similar to 2008 at the beginning of the large wave of rises, say Bank Leumi (TASE: LUMI) analysts in their monthly survey posted on the bank's blog.

Earlier this week data was published showing that building starts of new homes fell to 7,802 units in the third quarter, or 31,200 in annualized terms. This is the fourth consecutive quarter in which building starts have fallen with building contractors finding it difficult to obtain credit to begin projects. There were 46,000 building starts in the year ending in the first quarter of 2011, and 39,000 building starts in the year ending in the third quarter of 2012.

Leumi's analysts said, "The lower number of building starts in the past four quarters is expected to continue falling in the fourth quarter of 2012 and the beginning of 2013."

Leumi's analysts observe that each year there are 40,000 new households in Israel so that the current rate of building starts does not cover this. Thus Leumi's analysts say, "If the current number of building starts continues over time at a lower rate than the basic need of the economy (45,000 apartments) then within two to three years a shortfall in supply will develop as happened at the start of the period of rapid price rises in 2008."

According to the Central Bureau of Statistics apartment prices rose 10.2% in 2008, rising a further 21% in 2009, and 14% more in 2010.

Published by Globes [online], Israel business news - www.globes-online.com - on December 6, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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