The decline in housing prices will reach its lowest level by mid 2013, Yossi Efrati, head of ILD investment department, says in the department's August survey and September 2011 forecast.
"The outcome of declines in demand, which will deepen even more next year, as well as growing supply which will peak next year, are expected to drive real estate prices down by 15% pursuant to the modest declines which have started in the last quarter which means that holding off on buying a flat will pay off and the perfect timing to go ahead with the purchase is sometime in mid 2013."
The real estate market has slowed down, explained Efrati: "Administration figures out last weekend show a 16% drop in activity as compared with the first quarter of the year and a 3% decline in flat prices.
Investors' share in the real estate market dropped by 24% as compared with the previous quarter, Efrati noted, "as they are moving on to other venues also due to rising mortgage prices following the Bank of Israel interest hike in recent months."
On the supply side, according to the Centrals Bureau of Statistics, housing starts rose to 75,900 flats which constitute a 15% rise in the first half of the year as compared with the same half of 2010.
"There is no doubt that this number is higher than anything we have seen before and is the highest number since 2001. Considering that the construction of an average flat in Israel
takes two years, these flats will hit the market during 2013 and might push down prices," Efrati wrote.
As regards the stock market, Efrati noted that now was not a good time to invest. "Economic indicators published in Israel showed a decline in the unemployment rate to 5.5% indicating that the economy is drawing towards full employment.
"The overall picture of the Israeli economy remains stable; however, pressures due to the social protest and wage pressures will continue to set the tone in the near future and the stock market is already reacting negatively to the uncertainty and will probable continue to do so as long is the current state of affairs persists.
"Now is not a good time to invest in the stock market as risk levels and volatility will increase and the closer the Palestinian declaration of an independent state draws, pressure among investors will mount," wrote Efrati.
Therefore, Efrati recommends capitalizing on the rises over the past week to downsize Investments in shares.
As regards to government bonds, Efrati writes that "although one should bear in mind that in the current yield level, government bonds are not very appealing they are however a safe haven in times of an erratic stock market."
Efrati does not recommend corporate bonds "due to expected price drops and debt arrangements that are still expected due to the inability of a number of companies to meet their financial obligations and rolled over their debt in 2009 and now the day of judgment is upon them."
The investment department at ILD Insurance estimates that the Bank of Israel interest rate will remain steady over the upcoming months and the inflation rate for the upcoming year will be 2.4%.
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