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Prof. Nathan Sussman Head of Research Dept.
Bank of Israel
Housing costs in Israel – new Insights
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Source: CBS and the Bank of Israel 2
*Owned housing index from the consumers price index
60
70
80
90
100
110
120
130
House price index
divided by nominal
GDP per capita (100 = 1998)
Rental price index
divided by nominal
GDP per capita * (
100 = 1998)
Housing costs in Israel increased significantly in per capita
terms but are lower than in the 1990’s. Rents have declined
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3
Housing prices rose much more than rent prices; Tel Aviv leads the rise in both and the variance between areas increased
Tel Aviv
Source: CBS and the Bank of Israel
60
70
80
90
100
110
120
130
140
150
160
The second Lebanon war?
Areas which rose
significantly:
Tel-Aviv ,Gush
Dan , the Sharon ,
the
Center,Jerusalem
60
70
80
90
100
110
120
130
140
150
160
The second Lebanon war?
Tel Aviv
Housing price index divided by nominal GDP per
capita (3.5-4 bdms. apartments)
(1998=100 )
Rental price index divided by nominal GDP per
capita (3.5-4 bdms apartments)
(1998=100 )
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International comparison
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5
From a long term perspective, the rise in housing prices in Israel is moderate compared to small developed economies*
International comparison- Housing price index divided by nominal GDP per capita
(1990=100)
*Advanced, small, open, developed economies with independent currencies and which didn’t undergo a crisis following 2008
Source: CBS , the Bank of Israel, Dallas fed and the countries individual statistical offices
60
80
100
120
140
160
180
200
Australia Israel Norway New Zealand Sweden Switzerland Canada
Israel
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6
Since 2008 housing prices have risen in all small developed economies*; the rise in Israel is more significant
International comparison- housing price index divided by nominal GDP per capita
(2008=100)
Israel
*Advanced, small, open, developed economies with independent currencies and which didn’t undergo a crisis following 2008
Source: CBS , the Bank of Israel, Dallas fed and the countries individual statistical offices
60
80
100
120
140
160
180
Australia Israel Norway New Zealand Sweden Switzerland Canada
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Demographics
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8
“Baby boom’s” in the 50’s and 70’s and immigration from the former Soviet Union explain recent rise in share of 30-44 age group
in Israel
Source: UN
5%
7%
9%
11%
13%
15%
17%
19%
21%
23%
25%
0-4 25-29 30-44
Share of 0-4, 25-29 & 30-44 age
groups in Israel’s population
1950-2015 immigration from
former Soviet Union
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9
Housing prices are correlated with the share of the 30-44 age
group; rental prices are correlated with the share of the 25-29 age group*
*following the significant immigration from the Soviet Union
**since 2009 the population data is according to the new CBS census
Share of 25-29 age group in population,
rental price index divided by nominal GDP per capita
0.4
0.5
0.6
0.7
0.8
0.9
1
1.1
1.2
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
2020
forecast
Rental price index
divided by nominal
GDP per capita
(right axis)
(1 =1998)
Share of 25-29
age group in
population (left
axis)
0
0.2
0.4
0.6
0.8
1
1.2
1.4
17.5%
18.0%
18.5%
19.0%
19.5%
20.0%
20.5%
21.0%
2020
Forecast
Immigration
from former
Soviet Union
Housing price index
divided bnominal y
GDP per capita
(right axis)
(1 =1998)
Share of 30-44
age group in
population (left
axis)
Share of 30-44 age group in population,
Housing price index divided by nominal GDP per capita
Source: CBS and the Bank of Israel
Immigration
from former
Soviet Union
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The rise in the share of 30-44 age group in Tel Aviv is consistent with the sharp rise in Tel-Aviv’s housing prices
*since 2009 the population data is according to the new CBS census
Source: CBS and the Bank of Israel
14%
16%
18%
20%
22%
24%
26%
28%
30%
Tel Aviv Qrayot-Haifa Jerusalem Haifa Sharon North Center South Gush Dan
Tel Aviv
Share of 30-44 age group in
population, according to areas,
1996-2015
60
80
100
120
140
1601998
2001
2004
2007
2010
2013
2016
Housing price index
divided by nominal GDP
per capita (3.5-4 bdms.
apartments) (1998=100 )
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11 הלשכה המרכזית לסטטיסטיקה ועיבודי בנק ישראל: מקור
Share of 25-29 age group is highest in Tel Aviv; recently Tel Aviv has become less affordable for renters
*since 2009 the population data is according to the new CBS census
2%
4%
6%
8%
10%
12%
14%
Tel Aviv Qrayot-Haifa Jerusalem Haifa Sharon North Center South Gush Dan
Sharon
Tel Aviv
Share of 25-29 age group in
population, according to areas,
1998-2015
Source: CBS and the Bank of Israel
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12
In contrast to small open economies*, the share of 30-44 age group in Israel has increased; this is consistent with the higher rise
in housing prices in Israel since 2008 International comparison- Share of 30-44 age group in population
1990-2015
*Advanced, small, open, developed economies with independent currencies and which didn’t undergo a
crisis following 2008
Source: CBS, the Bank of Israel , UN and OECD
18%
19%
20%
21%
22%
23%
24%
25%
26%
Australia Israel Norway New-Zealand Sweden Switzerland Canada
Israel
60
80
100
120
140
160
180 International comparison-
housing price index
divided by nominal GDP
per capita
(2008=100)
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Appendix: many small developed economies* experienced a “baby boom” during the 90’s; this demographic change can
cause a demand shock to housing in the coming years
13
4%
6%
8%
10%
12%
14%
16%
International comparison- Share of 0-4 age group in population
1950-2015
Australia Israel Norway New-Zealand Sweden Switzerland Canada
*Advanced, small, open, developed economies with independent currencies and which didn’t undergo a crisis following 2008
Source: UN
Israel`s mini
“baby boom”
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The Bank of Israel’s Recommendations
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Bank of Israel’s recommendations for effective housing market policy
Creating a large planned supply over time, in areas of high
demand
increasing congestion in cities and areas of high demand
• Investment in the necessary infrastructure, in particular mass transit
systems
• Urban renewal: prioritizing “evacuation & building” plans over
Tama 38*
• Improving the incentive packages of local authorities (increasing the
volume of housing construction and supporting infrastructure in
their area)
15
* Plans which include renovating, strengthening and adding 1-2 floors to existing buildings
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Bank of Israel’s recommendations for effective housing market policy
Improving the planning and pre-construction process: shortening the required time from the initial design stage to the start of construction
• shortening the planning process without lowering quality
• Increase the synchronization between construction plans and infrastructure development
• Adjusting the housing mix to demographic changes (age structure, social norms)
Optimization of construction: prioritizing the integration of foreign construction companies owning advanced technologies over importing foreign workers
Preferring long-term considerations over short-term considerations : measures must be taken to maintain appropriate rate of construction starts in high demand areas, over time
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Thank You