Inflation rose to a record of 2.8% in the past 12 months - housing prices jumped by 10.6%

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by Ifi Reporter Category:Capital Market Jan 14, 2022

Peak in housing prices and in the yearly inflation: The Central Bureau of Statistics published the Consumer Price Index on Friday. The index rose 0.3% in December. In total, this is an increase of 2.8% in all of 2021. This is the highest increase in more than a decade and significantly above the Bank of Israel's latest forecast from last week, which stood at 2.4%.
Significant price increases were recorded in the clothing and footwear segment, which increased by 1.1%, housing (excluding apartment prices), which increased by 0.8%, furniture and household equipment, which increased by 0.7%, and food, which increased by 0.5%. Significant price decreases were recorded in the items of fresh vegetables and fruits, which decreased by 2.7% and culture and entertainment, which decreased by 0.8%, against the background of the spread of the omicron strain of the corona.

The annual index of 2021 is the highest since 2009, when the annual index rose by 3.91%. This was mainly the sub-prime period, when the indices deviated from the government target that was as it is today - 1% -3% - and reached 3.4% in 2007, 3.8% in 2008 and, as mentioned, even more than that in the following year.
From 2014 to 2020, particularly low indices were recorded, between minus 1% in 2015, and a positive index of 0.8% in 2018, and all deviated from the target set by the government, downwards. In the first corona year, 2020, a negative index of 0.7% was recorded.
It should be noted that estimates by the financial bodies in the economy are that 2022 will be inflationary and it is possible that the rate of price increase will exceed the target threshold of 3%. The Bank of Israel predicted only a few days ago, with the presentation of the annual forecasts in conjunction with the interest rate decision, that inflation in 2022 will be only 1.6%.
Significant price increases in the first months of 2022, which will become clear in the following indices, may lead to an increase in the first interest rate in Israel since November 2018, when the Governor for only one month, Dr. Nadine Bodo-Trachtenberg, raised the interest rate from 0.1% to 0.25 In the second month of the Corona crisis, April 2020, the current Governor, Prof. Amir Yaron, hastened to reduce interest rates in the wake of the great economic crisis in the economy and the first closure from 0.25% to 0.1% - and since then the interest rate has not changed.
Meanwhile, additional data published today by the Central Bureau of Statistics shows that comparing the prices of transactions made in October-November 2021 with the prices of transactions made in September-October 2021, it was found that housing prices rose by 1.4%, completing an increase of 10.6% compared to the same period last year. (October-November 2020).
In the segmentation of changes in housing prices by district in October-November 2021 compared with September-October 2021, price increases were recorded in the following districts: Tel Aviv 2.8%, Jerusalem 2.1%, Haifa 1.1%, South 0.9% and Central 0.5%; In contrast, prices in the northern districts fell by 0.4%.
In the segmentation of changes in apartment prices by district compared to the corresponding period last year, October-November 2021 compared to October-November 2020, price increases were recorded in all districts: Jerusalem 12.3%, Tel Aviv 10.7%, Central 10.5%, Haifa 10.5%, South 9.9% and North 7.1% .
In the price index of new dwellings, it was found that their prices increased by 2.4% in October-November 2021 compared with September-October 2021, thus completing an increase of 11.5% compared with the corresponding period last year (October-November 2020). The percentage of transactions carried out with government support and participated in the calculation is 23.6%, compared with 24.5% in the previous period (September-October 2021).
The price index of residential construction inputs rose by 0.2% in December 2021, thus completing an annual increase of 5.6% in 2021 as a whole. Significant price increases during 2021 were recorded in the item "Materials and products - total" which increased by 4.1%. It should be noted that in this section, the prices of iron for construction increased by 35.4%, wood for construction by 24.6% and air conditioning by 19.1%.
In September and October, apartment prices rose by a high rate of 0.9% and in total they rose in the first ten months of the year by 10.3%. The Minister of Finance, Avigdor Lieberman, estimated that prices will rise throughout 2021 at a rate similar to that recorded - about 11%, and in 2022 by another 5% -6%. It now appears that these estimates were probably lower than the price increase expected in the real estate market.

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