Chief economist at the Finance ministry: An increase in demand led to a surge in prices

The chief economist at the Ministry of Finance, Shira Greenberg, undermines the Ministry of Housing's hopes that the prices of apartments in the free market will be curbed following the renewal of subsidized housing tenders.The increase in apartment seekers in the free market has led to an increase in general demand and an increase in apartment prices. This claim was also influenced by contractors and apartment marketers and was quoted extensively in the media. Accordingly, the Ministry of Housing argued that the resumption of lottery operations would return those eligible to the waiting position and weaken the demand in the free housing market.
The ministry recently announced a new lottery of 10,000 discounted apartments. The ministry stressed that these are the first apartments out of 30,000, which the ministry intends to market during the year. It is doubtful, however, whether the results of the lottery convinced any of the eligible people that it would be better to wait for the next lotteries. Some of the apartments were offered in peripheral areas that are not sought after by the majority of those eligible for housing, while in the sought-after areas the chance of finding an apartment was negligible. On the other hand, the acceleration in the rate of increase in apartment prices causes significant losses for those who delay their purchase of an apartment they need.
If the meager supply presented by the Ministry of Housing is not enough, the chief economist dispels the illusion that the price-per-tenant plan is giving up the rise in apartment prices.
"Against the background of the sharp increase in young couples 'purchases in 2021, it has been argued that this increase was largely due to the lack of a continuation plan for the price per occupant - a fact that led to young couples' despair and thus contributed to the sharp rise in prices last year," the economist wrote. Last year. "As long as this claim is correct, it could have been expected that a higher proportion of those eligible for this plan would stop waiting to purchase an apartment with a government subsidy and turn to purchasing an apartment on the free market."
In an attempt to examine the claim, the economist examined the proportion of those entitled by the Ministry of Housing among the buyers of apartments in the free market in 2021-2018. The study was conducted among those entitled to a B series of a price-per-tenant program (those who enrolled in the program from September 2016 to September 24, 2017). To test for despair among these beneficiaries, the earliest year for this analysis is 2018.
Findings: The rate of eligible B Series buyers who purchased an apartment on the free market in 2021 was 5.2% - the lowest rate in the last four years, except in 2020 which was overshadowed by the corona plague. Precisely in 2018 - when the Central Bureau of Statistics' housing price index fell 0.8% (for the first time since 2006), no more than a year after enrolling in the program - there was a rate-eligible rate for a Series B tenant who purchased an apartment on the highest free market in the last four years (6.5 %). It was even higher than the rate of Series B beneficiaries who purchased an apartment at a price per occupant that year.
A separate survey published by the chief economist regarding the housing market in February this year shows that apartment purchases by investors remained relatively low compared to the period before the purchase tax was raised, and amounted to 1,500 apartments - a 30% decrease compared to the corresponding month in 2021. This is still a figure higher than the average of the three months after the tax increase - 1,400 apartments per month.
The decline in the share of investors did not cause a slowdown in apartment sales, which amounted to 10,600 and a peak of activity in the free market for seven years. The reduction in investor activity also did not achieve the stated goal of the Ministry of Finance and the government - to curb the rise in market prices - since in January-February the rate of rise in housing prices accelerated to more than 2% per month. Investors sold 2,400 apartments in February, thus contributing about 900 apartments to the offer.
The market share of investors has dropped to 14%, compared to 20% in February 2021.
Tel Aviv is leading the purchase of apartments for investment, with 186 apartments in February - double the second largest city on the list, Haifa. The volume of home purchases in the entire market was 10,600 in February, similar to February last year and a decrease of 8% compared to January.