Mortgages are getting more expensive and real estate prices are falling • Central Bureau of Statistics data

The Central Bureau of Statistics announced that in the Haifa district apartment prices in the months of January 2023 - February 2023 compared to December 2022 - January 2023 decreased by 0.5%.

Prices also fell in the Jerusalem and Tel Aviv districts, comparing the two periods - in Jerusalem by 1.1% and in Tel Aviv by 0.5%. These figures are significant, since in recent months apartment prices have risen, and now we are starting to see a drop in prices.

On the one hand, the containment of the crazy rise in real estate prices is to be welcomed, but on the other hand, the apparent reason for this is not particularly gratifying - the increase in mortgage prices, which makes it difficult for consumers to purchase apartments (and not an excess supply of apartments...).

A comparison between the prices of apartments sold now and a year ago (January-February 2023 vs. January-February 2022) reveals a 12.7% increase in apartment prices throughout the year. The segmentation by districts shows an increase in each of the districts: in Haifa 13.6%, in the north 17.2%, in Tel Aviv 11.1% and in Jerusalem 10.1%.

On the other hand, if you look at the prices of new apartments in the months of January - February 2023, compared to December 2022 - January 2023, you can see a decrease of 0.3%.

The consumer price index rose and housing prices fell

It should be noted that the change in apartment market prices is a figure that is not part of the Consumer Price Index, which is also published once a month. In March 2023, the consumer price index rose by 0.4%, while in the last year the increase in the index amounts to 5% (inflation). The main increases that affected the index this month are clothing and footwear and culture and entertainment.

The rise in interest rates is suffocating mortgage payers and lowering real estate prices

In 2022, apartment prices rose significantly all over the country and the Bank of Israel's interest rate increased dramatically throughout the year (from an almost zero interest rate at the beginning of 2022 to an interest rate of 3.25% at the end of the year), which greatly affected the costs of financing apartments.

The fact that mortgages became more expensive due to the increase in interest rates can explain the beginning of the drop in real estate prices. It will be interesting to see if the downward trend in apartment prices will continue in the coming months and how it will affect construction starts.

The President of the Association of Builders of the Land Builders, Raul Sargo: "If interest rates continue to rise, many contractors will lose their financial independence and some of them will collapse"

President of the Association of Builders of the Land Builders Raul Sargo:
"Once again it is proven that the increase in interest rates only fuels inflation. The Bank of Israel is taking the Israeli economy in general and the housing sector captive on a journey that hurts all the citizens of the country and destroys the legitimate dream of those who need an apartment and to stop the increase in interest rates immediately.

The drop in housing prices is welcome, but it is premature to celebrate due to the dramatic decrease in the supply of apartments, which will cause the market to jump in prices later. The Israeli government is absent from the economic field and the housing market, just before the peak of a crisis we have not yet experienced. The responsibility is on the state leadership to give incentives that will not stop the construction starts due to the huge shortage of apartments and will help the homeless.

As the representative of the industry, I tell you that if interest rates continue to rise, many contractors will lose their financial independence and some will collapse. This is an event that can reach the pocket of every citizen in Israel with a drop in the ability to build and a jump in housing and rental prices."