A slowdown in the pace of residential construction starts: in Q3 construction of 14,675 has began

A slowdown in the pace of residential construction starts. According to data from the Central Bureau of Statistics, in the third quarter of 2022 (July to September), the construction of 14,675 apartments began.

This is a decrease of about 5% compared to the corresponding quarter in 2021 when the construction of 15,482 apartments began. Compared to the second quarter of 2022 when the construction of 17,293 apartments began, this is already a 15% drop in the rate of construction starts. In fact the figures for the third quarter of 2022 are the lowest recorded since September 2021.
Despite the quarterly decrease, the annual rate of construction starts is still high and is estimated according to the Merced Bureau of Statistics at about 70 thousand apartments between October 2021 and September 2022. During this period, the construction of 70,250 apartments began, about 15% higher than the corresponding period last year (ie: October 2020 - September 2021) where the construction of about 60 thousand apartments began.
Despite this, the decline in the last quarter could mark the beginning of a worrying trend. Due to the increase in interest rates in general and interest rates on mortgages in particular, there has been a decrease in demand for apartments in recent months. Last week, Chief Economist Shira Greenberg reported that October 2022 was one of the weakest Octobers in the last 20 years. The expectation is that a continued decrease in demand will lead over time to a drop in prices or at least to a containment of the price increase. But a slowdown in demand could cause contractors to slow down the pace of construction to avoid unnecessary risks. Such a prolonged phenomenon may in the future lead to a renewed shrinking of the supply of apartments and another wave of price increases. The new government must make sure that the third quarter figures are a one-time event and create incentives for contractors to continue building even in a period of declining demand and falling prices.
46.5% of the apartments whose construction began in the 12 months under review are in the Central and Tel Aviv districts. The leading cities in the rate of construction starts in the period between October 2021 and September 2022 are Tel Aviv-Jaffa (5,484), Jerusalem (4,000), Beit Shemesh (3,287), Bat Yam (2,870), Netanya (2,755), Rishon Lezion (2,479) Ashkelon (2,398) ) Petah Tikva (2,272) and Ramat Gan (2,014).