January 20, 2020

Hapoalim, Leumi see housing prices rising in 2020

Arik Mirovsky, Globes, 20.01.2020

Bank Leumi (TASE: LUMI) and Bank Hapoalim (TASE: POLI) both believe that the real estate market will continue rising this year. Bank Leumi's economists write that housing prices will continue rising slowly in the short term, while Bank Hapoalim's economic division writes, "The real estate market will continue to be an important growth engine in 2020." Bank Hapoalim believes that excluding Buyer Fixed Price Plan deals, the volume of deals closed in recent months has increased."

The two banks' economic departments issued economic reviews in the past few days describing real estate as a growth sector. "Since the volume of housing sales sank to a low point in late 2017-early 2018, the trend has changed, with activity expanding as a fairly rapid rate throughout 2019. This rapid rise is primarily the result of a strong increase in new home sales in the framework of the Buyer Fixed Price Plan," the economic section of Bank Leumi's capital market division, headed by Dr. Gil Michael Bufman," writes.

Bank Leumi's economists write, "The current trend indicated by the date should be treated with caution, since the type of deals in the Buyer Fixed Price Plan is not conducted in the same as the way an ordinary deal on the open market (the general market, excluding the Buyer Fixed Price Plan), and therefore does not fully reflect the substantial rise in demand for housing at the present time."

Bank Leumi holds that activity in the residential real estate market, together with the downtrend in housing inventory available for sale, "constitute factors supporting the development of pressure for price rises in the short term."

The bank's economists stress, however, that "We do not expect a return to the steep rises of earlier years, but a slow increase in prices, among other things because present activity in the housing market is affected to a large extent by Buyer Fixed Price deals, which mostly feature lower prices than in the open market."

Bank Hapoalim emphasizes sales on new homes in October and November 2019, which reached 3,000 housing units in both of those months. "In 2019, a 38% increase in the number of new homes sold took place," Bank Hapoalim writes. Bank Hapoalim also cites the Buyer Fixed Price Plan as an important factor in the larger number of new homes purchased, and predicts that their proportion of total new homes purchased will be higher than 40%. It should be noted in this context that surveys by the Central Bureau of Statistics and the Ministry of Finance chief economist show that this proportion was halved in recent months.

Bank Hapoalim also stresses a clear increase in the number of deals on the open market, and that housing prices rose 3.4% in the past year. "We believe that the rise in demand for housing and the maturing of Buyer Fixed Price Plan projects will lead to an increase in housing starts in 2020, and that the real estate sector will make a significant contribution to growth this year," Bank Hapoalim's economists write.

Published by Globes, Israel business news - en.globes.co.il - on January 20, 2020