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Construction of 40,000 apartments a year not enough to bring about price reductions
Photo: Shutterstock

2012 sees 13% drop in building starts

While home prices continue to rise, construction pace slows down. Number of apartments built in 2012 barely catches up with natural growth rate, will not suffice to compensate for shortage accumulated in past few years

The year 2012 recorded a 13% drop in building starts, the Central Bureau of Statistics (CBS) reported.


The third quarter of the year saw a 20% slowdown in construction pace compared to the same quarter in 2011, while the fourth quarter saw a 6% increase in the number of building starts.


The drop in the building rate was recorded despite the government's stated efforts to increase the supply of apartments in response to the ongoing price hikes in the housing market.


Last week, the CBS reported a sharp decline in the demand for apartments in January 2013. Yet despite the 20% drop in the number of buyers, the number of apartments left "on the shelf" was smaller than in January 2012 – pointing to a significant drop in the supply of apartments alongside the drop in demands.


Some attribute the construction rate slowdown to contractors' credit crunch, while others attribute it to the drop in demands which prompts contractors to delay the construction of new projects. The decline can also be ascribed to the shortage of available lands for construction.


According to the CBS figures, there was a 7.9% increase in 2012 in the number of apartments whose construction was completed. This rise occurred following the relatively high number of building starts in 2010, a trend which has now ended.


The figures further reveal that 2012 saw the start of the construction of some 39,000 housing units in Israel. About 29% of these apartments were built in the central district, about 10% in Jerusalem and Haifa, 16.7% in Tel Aviv and about 20% in the northern district.


Not enough flats to meet demand?

Is this amount of new apartments enough to contribute to a price reduction? Some claim that the population gets an addition of some 40,000 new households (young couples starting a family and seeking to buy a home) a year, and that in this sense the current rate of construction is enough to meet the demand.


Yet the past few years have seen the creation of an accumulated shortage in housing units available for purchase. Since the beginning of the 21st century, only two quarters (in mid 2011) recorded a construction of more than 40,000 apartments.


In March 2011, Prime Minister Benjamin Netanyahu stated that "there is a gap of 10,000 apartments a year, and the accumulated gap ranges between 60,000 and 100,000 apartments."


The significance of the accumulated gap is that the construction of 40,000 apartments a year is not enough to bring about a price reduction.


Housing and Construction Minister Ariel Atias addressed the issue in an interview to Maariv in March 2011, saying that "we'll approve programs so that the national housing committees always have 50,000 housing plans."


Commenting on the CBS data last week, Atias said that "once and again the figures beat the forecasts and the ambitious targets set by the government. The marketing of lands of housing purposes, which was the flag raised by the ministry in the last term, proved to work and made a crucial contribution to the rise in building starts and a record number of apartments in active construction."


According to the minister, "Greater supply means easing the housing distress. The volumes of building starts in the past three years were very close to the days of the major aliyah in the first half of the 1990s.


"During the past decade we experienced a shortage of tens of thousands of housing units, and in the past three years we managed to gradually reduce it. However, building starts could have been created for thousands of additional housing units a year, had the relevant elements solved the credit crunch, provided oxygen to the real estate market and prevented young couples from being negatively affected."



פרסום ראשון: 03.15.13, 12:58
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