Treasury: Apartment prices dropping

Apartment prices in Israel fell by 0.8% in December following a 5.7% slump in November, the Finance Ministry reported last week as part of its monthly report examining the state of the economy.

According to the report, the price reduction was accompanied by a 2.1% increase in the number of purchased apartments, particularly second-hand flats, compared to November.

The Finance Ministry determined, however, that the activity in the real estate market remained almost unchanged in December, while the previous month saw a recovery in realty deals. The report contradicts statements by contractors and buyer groups' managers that the real estate market is thriving.

December saw a drop in the sales of new apartments, but this was compensated by a rise in the sales of second-hand flats, Treasury officials explained. The drop in new apartment sales may stem, at least partially, from contractors' tendency to raise prices and from investors' estimates that the prices have reached their peak.

According to the Levi Itzhak firm's data on second-hand apartments, December and January saw a rise in the demand and prices of five-room flats, while the demand for four-room flats had dropped and their prices remain unchanged.

Haifa real estate still attractive

According to Levi Itzhak, the Haifa areas continued to create demands, but fewer apartments are being bought for investment purchases today and there are more price hikes in larger apartments in several neighborhoods.

Hadera has also joined the map of demands, with an 8% to 10% price increase, particularly in the case of large apartments.

The Treasury report includes more good news for Israel's citizens: A future improvement in the state of the economy. As of the second quarter of 2009, the Israeli economy shifted from negative to positive growth, with a particularly high growth rate in the second half of the year.

Ofer Petersburg contributed to this report