The Bank of Israel and the International Monetary Fund (IMF) reported significantly different figures for the 2016 rise in housing prices in Israel. The Bank of Israel's figure was 6.3%, compared with 7.5% by the IMF. The IMF said there is no bubble in the Israeli housing market although it estimates prices are 9% above their real value.
The IMF today published its complete report on the Israeli economy, following a visit to Israel by an IMF delegation early in the year. In the report, the IMF Executive Board "commended Israel’s sound policies, which have resulted in strong macroeconomic performance." At the same time, the IMF noted, "While noting that the near-term outlook remains favorable, the executive directors also recognized that the country faces important structural challenges from elevated housing prices, high incidence of poverty and inequality, low labor productivity, and low labor force participation in some groups of the population (referring to haredi (ultra-Orthodox) men and Arab women, A.B.). Against this backdrop, the executive directors call for continued sound policies that safeguard macroeconomic and financial stability and for deeper structural reforms that help improve potential growth, while reducing poverty and inequality."
Among other things, the IMF is advocating measures that will increase the supply of affordable housing for young couples and poor families, combined with continued action through planning commissions and local government to boost the number of housing starts.
Minister of Finance Moshe Kahlon said in response, "The IMF report puts Israel in the forefront of the world's leading economies. The report says that our economy is growing, strong, and stable, with low unemployment. The conclusions are consistent with the report by the Ministry of Finance chief economist, who wrote that the economy's strong growth was boosting people's disposable income and reaching the lower income deciles. The IMF report backs the reforms we led in the last budget, and says that these reforms will help continue growth and reduce over-concentration. The report cites with approval the actions we took in housing, including the transfer of all authority to a single address in the Ministry of Finance. The economic policy we are following - free enterprise and social sensitivity, with a growing economy and responsible budget management - is proving itself as effective and producing results. We plan to continue in this direction for the benefit of Israel's economy and people."
Published by Globes [online], Israel Business News - www.globes-online.com - on March 29, 2017
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