Israel property bubble a concern for economists

Despite tighter lending policies and repeated warnings from the Central Bank, house prices continue to rise in Israel at double-digit rates. Although the rate of increase has somewhat eased, the monetary authorities are clearly worried.

The average price of owner-occupied dwellings rose 16.4% y-o-y and 4.4% q-o-q to Q3 2010, according to data from the Central Bureau of Statistics. Although the annual price increase was lower than the 22% surge in Q4 2009, it was the sixth consecutive quarter of double digit price increase.

Strong price increases were seen throughout the country. In Tel Aviv, the economic Centre, the average house price rose 17.75% y-o-y to ILS 1.778 million (US$499,245). In Jerusalem, the 17.5% price increase pushed average prices to ILS1.42 million (US$398,216).

Annual price increases in other administrative regions ranged from 15% in the South, to 20% in Haifa. The current upswing in house prices has pushed the national average price, at ILS1.05 million (US$294,660) up by 37% during the period from Q4 2008 to Q3 2010.

Over the same period, the average price in Tel Aviv has risen by an astonishing 46%, and in Jerusalem by 30%.

Source: NuWire Investor