The Marker, Hadar Horesh, 15.10.2020

The decline in the housing price index by 0.3% is far from indicating the weakness of the market. The figure that better reflects the state of the housing market is the annual increase of more than 2%. Further to this, and in view of the paralysis that gripped the offices responsible for housing policy, we may very well miss an annual price increase of 2.3%: the supply of new apartments is on the verge of collapse, and none of those responsible for the situation are excited.

The declines in the housing price index in July-August mainly reflect a weakness, apparently temporary, in the second-hand housing market. The sellers in this market are housing improvers, who often buy a new apartment before selling the old one. During the period of uncertainty between the closures, the sellers prefer to compromise and lower the price, the main thing is to close the deal in time before the closure hangs the deal for an unknown date.

Since the collapse of the discounted housing policy led by former Finance Minister Moshe Kahlon, the government has had difficulty presenting an alternative policy

The "weak hands" phenomenon has intensified in the last two months, although the level of activity in the market has been reasonable. Unlike the second-hand housing market, there is no particular pressure in the new housing market: the contractors do not suffer from liquidity difficulties. After the first closure, buyers returned to the market more vigorously, while the supply of new apartments remained rigid and low. Some contractors said in a conversation with TheMarker this week that they even raised prices on the eve of the closure.

This is an almost automatic price increase, as part of the contractors 'business strategy: at the beginning of the project marketing, the apartments are offered at lower prices, especially in light of the banks' financing requirements from the contractor for early sales proving that there is demand for the project. As sales progress, contractors tend to raise prices. Since the beginning of the corona, few contractors have opened sales of new projects, so there is a high rate of advanced sales projects in the market whose prices are rising.

Another phenomenon that causes the prices of new apartments to rise is the declining sales of discounted apartments as part of a price-per- tenant program. When the plan was at its peak, it included about half of the new housing market. Recently, the market share in the plan fell to a rate of about 30%. The decrease in the number of apartments offered in the plan raises the average price of the new apartments.

Although most of the apartments on the market, about 60%, are second-hand apartments, the new housing market in particular shows the direction of the wind: the new housing sector reflects the situation of the addition of apartments to the market that has been in short supply in recent years. The rise in the prices of new dwellings at an increased rate indicates the widening of the gaps between demand and the increase in supply, and sooner or later the growing shortage will translate into a rise in prices in the entire market.

During the period of uncertainty between the closures, the sellers prefer to lower the price, the main thing is to close the deal before the closure postpones it to an unknown date.

All indications are that price increases, especially in the new housing market and later also in the second-hand housing market, are expected to intensify. Since the collapse of the discounted housing policy led by former Finance Minister Moshe Kahlon, the government has had difficulty presenting an alternative policy. The new Minister of Housing in the new government, Yaakov Litzman, retired after four months , during which he did not have time to formulate a new policy. Meanwhile, the activities of the ministry and other bodies involved in promoting the construction industry have been silenced.

The Israel Land Authority, which is primarily responsible for providing new plots of land for construction, has stopped marketing activities almost completely, for reasons that are not clear. A significant decrease was felt in the rate of issuance of building permits by the authorities, in the rate of planning and in many cities approvals for urban renewal plans were frozen. Roof agreements, the main tool by which the government has promoted large-scale construction projects, have also stopped being signed, and activity under previously signed agreements is declining.

The result of the paralysis of housing policy is already well felt: in annual terms, house prices rose by an average of 2.3% - a relatively moderate rate of increase that is unlikely to be maintained later: it should be remembered that this is a price increase The new housing market rose at a more moderate rate during the year, but in recent times it has shown strength in July-August, at a rate of 1.7%.