Apartment Prices May Rise Soon

Bank of Israel Governor Prof. Amir Yaron addressed the budget, taxes, inflation, interest rates and also two areas that are rarely discussed: technology and apartment prices. Bank of Israel Governor Prof. Amir Yaron stressed the importance of the Nasdaq for technology and, although he did not say so explicitly, it can be understood that he is not pessimistic about the growth of local technology: "The market is more decentralized than during the dot-com crisis; most companies are at the production stage, compared with the immaturity of that time. We must make sure that investors come mainly for the benefit of very young companies, of which X move on to the next stage."

The governor's statements about the real estate market are not surprising, but they are worrying. The governor also believes that the upward trend may start again as early as the second half of the year. The claim by the economic elite is self-motivating. On the one hand, I must warn the governor; on the other hand, his forecast will lead people to buy apartments, increase demand and turn it into a self-fulfilling prophecy. Consider the statement by former Finance Minister Avigdor Lieberman two years ago that apartment prices would rise by 5%, a statement that pushed potential buyers to buy apartments immediately and created an explosion of demand that raised apartment prices at a double-digit rate that year.

We have no right to criticize the governor; he must send signals and warn. But this increases the possibility that a change in the price trend will indeed occur as early as the second half of the year (the decrease in demand for apartments - AI), and it helped inflation enter the target range more quickly. The risks to inflation lie in the real estate market: to the extent that supply does not expand, whether through foreign workers or through the return of some Palestinian workers, there may be an increase in prices, and rents will rise too, which will affect inflation.

"There is a decline in housing prices. Even before the war, the entire planning and infrastructure process was a process that should have been expanded; without this, we will not continue to see apartment prices continue to moderate. As long as supply does not expand, whether by bringing in foreign workers or by returning some of the Palestinian workers, it is very possible that there will be a price increase in the second half of the year. Along with the rise in real estate prices, rental prices will also rise, and this will contribute to inflation."

In the end, land prices should be adjusted so that profitability for contractors is favorable, and this should be done by adjusting land prices, tendering infrastructure and lowering minimum prices.