"The encouraging growth in housing starts does not yet constitute a change in trend," says Bank Leumi in response to housing start figures published by the Central Bureau of Statistics earlier this week. Pointing to seasonally adjusted figures, Bank Leumi wrote that housing starts totaled an annualized 30,800 in the second quarter, more than in the first quarter, and similar to the average of the past five years.
Central Bureau of Statistics reported that seasonally adjusted annualized figures showed 30,862 housing starts in the second quarter, up from 28,818 in the first quarter. Actual housing starts fell 1.3% to 7,296 in the second quarter from 7,496 in the first quarter, and trend figures show an annualized drop of 5% in housing starts to 30,507 in annual terms in the second quarter from 30,902 housing starts in the first quarter.
Bank Leumi stated, "Since the start of the year, there has been a rise in new home sales due to the increase in demand, while we're seeing that the present supply is insufficient to maintain the multi-year equilibrium without raising prices. As we've stated before, it is possible that the interest rate hike by the Bank of Israel will ease demand for new homes."
Bank Leumi adds that the interest rate hike by itself will not help to reduce housing prices, since it is necessary to increase the supply of new homes. "When there is energetic activity to increase the supply of apartments, it will contribute toward equilibrium in price levels, which will not be reflected in exceeding the inflation target."
Bank Leumi said that apartment price rose by about 12% over the past 12 months because of the limited supply and the low interest rate, which rendered other investment instruments less worthwhile.
The Central Bureau of Statistics stated that there were 14,790 housing starts in the first half of 2009, 3.3% fewer than in the first half of 2008. It estimates that the current rate of housing starts will result in a shortfall of at least 8,000 homes compared with demand.
Published by Globes [online], Israel business news - www.globes-online.com - on September 3, 2009
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