According to the CBS report, prices for brand-new apartments rose by 17.8% in January and February 2022 compared to the same period last year, climbing by just over 5% from December 2021 alone. Demand was highest in Tel Aviv-Jaffa, Bat Yam, Jerusalem, Ashkelon, Netanya, and Rishon Lezion.
At the same time, there is more housing construction. CBS estimated in a separate report earlier this month that in 2021, construction began on 63,300 new apartments, almost a quarter of them in the Tel Aviv area and about a quarter in central Israel.
Also in 2021, building permits were issued for over 76,000 housing units, according to the same CBS.
The government has put forth an ambitious housing plan for 2022-2025 with an eye toward stabilizing prices. The plan set a target of starting construction of 280,000 homes over the next four years — significantly more than in recent years — advancing plans for 500,000 more housing units, publishing tenders for 300,000 homes on state-owned land, and having 180,000 successful such tenders.
The government has also committed to market some 30,000 affordable housing units under lottery systems to first-time buyers in 2022, with the first 10,000 underway as part of the new “Target Price” (Mehir Matara) scheme.
Separately, despite rising costs, mortgage data released this month by the Bank of Israel shows Israeli households took out new mortgage loans of NIS 5.6 million ($1.7 billion) for March, up 21% on February.
Another report by the Finance Ministry’s Chief Economist Office showed that investor activity in Israel’s housing market continues to cool, following the reinstatement of a purchase tax for investors (defined as households that own one or more dwellings) of 8% from 5%. The tax hike was reintroduced in late November 2021 in a bid to dissuade households that already owned a home from buying more and contributing to rapidly rising housing prices.
Prior to the tax hike, close to 40% of all housing units bought in November and October 2021 were by investors. In February 2022, investors made up 14% of buyers who were most active in Tel Aviv, according to the Finance Ministry report.
A recent survey of 38 countries’ real estate prices by an Australian property organization found that Israel was the second least affordable housing market, with an affordability ratio of 30.6% (measured by looking at average household disposable income and average property prices). South Korea ranked first.
Turkey was found most affordable for real estate, according to the study, with the US coming in second.
The average price for a four-room (three-bedroom) apartment in Israel reached almost NIS 2,300,000 ($712,298) in Q4 2021, according to quarterly and annual research by the Alrov Institute for Real Estate Research at Tel Aviv University’s Coller School of Management. That figure is higher by March 2022.
The institute studies average four-room apartment prices in 12 cities in Israel, calculating affordability gaps and loan-to-value ratios (a calculation in mortgage lending to determine the amount required to put in a down payment). The cities include Bat Yam, Rehovot, Ramat Gan, Petah Tikva, Rishon Lezion, Haifa, and Beersheba, as well as Tel Aviv and Jerusalem
The same study showed that buyers need about NIS 983,566 ($304,605) in personal equity to purchase apartments, up 12.4% from the previous quarter; this covers a down payment, closing expenses, taxes, lawyer fees, and other surrounding costs.