The war will lead to an increase in demand for apartment prices/Avi Rokah
The Bank of Israel publishes today (Wednesday) the financial stability report for the second half of 2023, which deals, among other things, with the housing market, and presents a confusing picture, according to which demand from buyers will likely increase following the war, while the issue of supply remains unclear.
According to the Bank of Israel's report, the period before the war was characterized by a high inventory of unsold apartments and significantly lower activity in the construction industry.
There was a decrease in the number of transactions and the volume of new mortgages, indicating a decrease in demand.
During the 12 months between October 2022 and October 2023, the housing market experienced a decrease in prices at a rate of approximately 2%, while at the same time the rent recorded an increase of approximately 5% during the same period.
As a result, the ratio between apartment prices and rents, a crucial indicator of market pricing, decreased.
Similarly, the ratio between apartment prices and the average salary of the household also recorded a decrease.
However, it is worth noting that these indices still remain higher than in previous years.
How will the war affect the housing market?
With the outbreak of war, the Bank of Israel anticipates substantial changes in the housing market, both in demand and supply.
On the demand side, the economic damage and the increased uncertainty surrounding future income are expected to temporarily decrease the demand for apartments.
However, the displacement of the evacuees from their homes in the north and south due to the war, may cause an increase in demand for apartments in areas far from the border line, when they look for alternative, temporary or permanent residences.
The purchase of apartments by Jews who live abroad and experience anti-Semitism due to the war may also contribute to increasing demand.
On the supply side, although the stock of unsold apartments remains high as of the date of the report, the construction industry has suffered significant damage due to the unavailability of workers recruited into the reserves, as well as the absence of Palestinian workers, foreign workers and project shutdowns due to security concerns The impact on the construction industry is particularly noticeable in new projects, where there is difficulty in recruiting skilled workers.
"An uncertain future for the housing market"
The Bank of Israel points out that currently it is difficult to predict which effects will be more significant and how they will affect apartment prices.
This depends on the various developments of the war and its consequences on industrial activity.
As long as the situation remains as it is, the report states, the housing market will continue to face uncertainty and potential fluctuations in pricing.
In conclusion, it seems that overall the future of apartment prices remains unclear amid the ongoing war, when the development of the war in the coming months, which will affect the demand and supply factors, will have a decisive effect on apartment prices.
The Bank of Israel's financial stability report is published twice a year.
In this report, the bank's economists express their assessment regarding the exposures to the main risks faced by the financial system, analyze the exposures and evaluate potential risk scenarios.
The first semi-annual report is a full report, which includes an analysis of all the exposure channels and the potential risks to the financial system;
This is alongside the analysis of the stability of the financial institutions and their durability.
The second half-yearly report, which the article deals with, is an abbreviated report that focuses on updating the new developments that took place in the period under review and expands on current issues concerning the stability of the financial system.
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