Home prices double OECD average in salary terms

Despite the easing of home prices in Israel in recent months, the number of salaries Israelis need to buy home is still high, and in some cases, more than double the OECD average, according to a Ministry of Housing and Construction survey of how many average national salaries were needed to buy a new and second-hand home in 2011.

Israelis need 191 average salaries to buy a five-room apartment, double the OECD average of 96 monthly salaries. According to BDO Ziv Haft, 90 salaries are needed to buy an apartment in France, 71 salaries are needed in the UK, 60 salaries in the US, 54 salaries in Germany, and 30 salaries in Sweden. In Israel, 138 salaries are needed to buy a four-room apartment, and 91 salaries are needed to buy a three-room apartment

The number of average national salaries needed to buy a home in 2011 were higher than in 2010, when 88 salaries were needed to buy a three-room apartment, 133 salaries to buy a four-room apartment, and 187 salaries to buy a five-room apartment. In 2007, the number of average national salaries needed to buy a home was 71 salaries to buy a three-room apartment, 106 salaries to buy a four-room apartment, and 154 salaries to buy a five-room apartment.

"Since 2005, the average salary has been stagnant in real terms, making it hard to buy a home as prices rose," says the Ministry of Housing.

At the "Globes" Real Estate Conference last week, Minister of Housing and Construction Ariel Atias said, "My dream is for 96 salaries to be enough to buy an apartment, as in the OECD."

The Ministry of Housing also said that the easing of home prices in recent months, means that prices, in real terms, are only 3% higher than the long-term trend, which shows a 2% annual increase in prices in real terms since 1967. The ministry says that prices were 29% higher than this trend in 1997 and 19% higher in 2007.

"The improvement in demand for homes late last year was also affected by the interest rate cuts by the Bank of Israel, which benefited potential homebuyers," says the ministry. "Conversely, supply and inventory are higher, compared with the low supply in 2009, offering a reasonable response to demand while prices stabilize of fell."

Published by Globes [online], Israel business news - www.globes-online.com - on March 11, 2012