According to data published today by the Central Bureau of Statistics, in the 12 months July 2022-June 2023, construction began on about 57,780 apartments, a decline of 20.3 percent compared to the previous 12 months. A breakdown of the data by quarters shows that in the second quarter of 2023, construction began on 13,290 apartments – a drop of 28% compared to the same quarter last year – the lowest figure since 2020 – the year of the COVID-<> crisis.
"The rate of building starts is declining significantly." construction of new buildings (archive),
The last wave of home price increases halted several months ago, and the latest data published last week indicated a slight decline in the monthly home price index and a halt in the annual home price index to about 2.6 percent. However, the data released today indicate that this encouraging trend may reverse in about two years from now. This is because the rate of building starts is declining significantly and for a long time, or simply put, contractors are building less, and this may be reflected in a shortage of housing supply in the future and lead to a renewed wave of home price increases.
There has been talk for a long time that high interest rates have caused a decline in household income, contractors' income, and a decline in building starts. In comparison, 2022 amounted to about 65,56 new building starts. If the last two quarters of this year amount at the same pace as the first two quarters, the year will end with 2,65 building starts. This figure does not meet the needs of Israel's population, which is growing at a rate of about 70% a year. It is estimated that in order to meet these needs, construction of <>-<> housing units per year must begin.
Apartments whose construction began by district, July 2022-June 2023, photo: Central Bureau of Statistics
Record building starts by locality
• The localities with the highest number of building starts over the past 12 months were: Tel Aviv-Yafo (4,939), Jerusalem (2,919), Bat Yam (2,703), Rishon LeZion (2,358), Ashkelon (1,972), Netanya (1,663).
• Among the localities where there was an increase in the number of apartments whose construction began in the 12 months of July 2022-June 2023, after declines recorded in the previous 12 months, were: Bnei Brak, Modi'in-Maccabim-Reut and Eilat.
Smotrich: "Housing prices are constantly soaring and we are all paying the price" (Archive) \\ GPO
Raul Serugu, president of the Association of Contractors and Builders of the Land, said in response that "the rate of building starts dropped from almost 80,000 apartments last year to construction volumes in 2015-2016. The difference between the number of building permits and the volume of building starts was created due to the stricter conditions of banks in providing accompaniment and dependence on receiving a work start order from the municipality, whose sole purpose is to delay construction and is currently received up to a year after receiving the building permit."
Sarugu told Israel Hayom: "The government cannot stand idly by and let this situation continue. She must respond immediately. There is a market failure here. Whatever happens in a few months, when home buyers return to the market, whether it's because of falling interest rates or because of the solution to the political conspiracy, then we can expect a catastrophe for a continuation of price spikes."
"The government must respond." Raul Serugu (archive),
"We welcomed the halt in the surge in home prices. Price stability makes it easier for us, reduces land prices and maintains welcome stability. Without government intervention now, buyers sitting on the fence are likely to return to the market soon. Signs of a return have already been reported in the media, and the housing shortage, which is expanding every day, will lead to a return to a price spike and will harm the entire public. Tenants are the hardest hit."
Serugu reiterates his call on the government to reduce the purchase tax for investors: "A vital step by the government that will have an immediate impact on the housing market is a reduction in purchase tax for investors, which will add rental apartments and stimulate building starts. Without state intervention, home buyers will also pay a huge fine for this period and the rest of the public will be harmed by the loss of state tax revenues amounting to billions of shekels."
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