Bank of Israel study: No housing bubble
Home prices rose 35% in real terms between December 2007 and August 2010 - an average rate of 12% a year.
The researchers note that home prices rose 35% in real terms between December 2007 and August 2010 - an average rate of 12% a year, well above their long-term growth rate. This raised concern that the rise in home prices was disconnected from the market fundamentals, and was based on expectations of capital gains and the development of a bubble process.
The researchers examined home prices from the perspective of the rent-income ratio and then based on a comparison of the standard property pricing with the fundamental price, which is derived from three different methods.
The researchers' analysis found that while home prices in August 2010 were somewhat higher compared with the long-term fundamental factors, they did not deviate from levels in previous episodes. Various measures found that the actual prices ranged between 3% below the fundamental price and 10% above it.
Published by Globes [online], Israel business news - www.globes-online.com - on July 10, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011
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