The Bank of Israel is pleased by the moderation in the housing market in recent months, but is careful not to say explicitly that a turnaround in housing prices has begun, according to the minutes of the last Monetary Committee meeting, which were published today. The Monetary Committee decided to keep the interest rate unchanged at 1%,
"The committee members discussed the housing market data, and agreed that the moderation in the rate of home price increases in recent months, in the new mortgages granted and in the number of transactions, as well as the supply of new homes, which continues to expand as reflected in data on building starts and completions, are all positive indications," the minutes state. "The committee members said that even so, the risks in the housing market still exist, and it is still early to discern a turnaround in the trend from the new data. In addition, the committee members noted that the increase in the average interest rate on new mortgages (despite the concurrent decline in the Bank of Israel interest rate) and the decline in the risk level of new mortgages issued were evidence of the effectiveness of the macro-prudential policy adopted by the Banking Supervision Department."
The housing component of the CPI (based on residential rents) fell by 0.3% in November. This component rose by 3.5% in the twelve months through November, down from 3.7% in the twelve months through October. The Central Bureau of Statistics Survey of Home Prices fell by 0.1% in September-October, and earlier readings were revised downward by a cumulative 0.5%. In the 12 months through October, prices rose by 8.6%, compared with an increase of 9.6% in the 12 months through September. There was a slight moderation in the number of housing transactions.
The Monetary Committee also discussed the appreciation of the shekel against the dollar, including in relation with the US Federal Reserve's tapering of its quantitative easing program. The committee members agreed that it was still early to estimate what the overall effect of the tapering process will be on the exchange rate of the shekel.
Published by Globes [online], Israel business news - www.globes-online.com - on January 6, 2014
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