The price of land per apartment in central Israel rose 60% in 2006-11, the same as the rise in housing prices, states the Bank of Israel Research Department in a study published today. However, in the periphery (the northern, Haifa and southern districts), the price of land per apartment rose 15% in this period, but housing prices rose 50%.
In absolute terms, the price of land per apartment in central Israel (excluding VAT) rose by more than NIS 150,000 in 2006-11 and housing prices jumped by more than NIS 500,000. In the periphery, the price of land per apartment rose by NIS 10,000 and housing prices rose by more than NIS 250,000. The price of land peaked in 2011, at NIS 450,000 per apartment in central Israel and at almost NIS 100,000 in the periphery, about one-third and one-tenth of the price of a typical 3.5-4 room apartment, respectively.
"The analysis therefore shows that in the center of the country, the increase in land prices is in conjunction with increases in home prices - a direct result of high demand for housing and limited supply of land for construction. In contrast, in the periphery, the correlation is weaker and it is easier to moderate the increases in home prices through expanded marketing of land, since the Israel Land Administration owns a relatively large portion of the unbuilt land, and has a greater ability to market it within a short period of time than it does in the center of the country also due to fewer planning limitations," says the Bank of Israel.
The Bank of Israel also found a positive correlation between residential land prices and the rate of land that the Israel Land Administration sold as a share of what it marketed. In 2010-11, when the Israel Land Administration greatly increased land sales, 94% of the land it marketed in central Israel was sold, but the proportion of land sales in the periphery was lower.
Published by Globes [online], Israel business news - www.globes-online.com - on June 5, 2013
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