New figures released by Israel’s Central Bureau of Statistics (CBS) show that housing prices have dropped for the first time since 2020. The figures also reveal that inflation is showing signs of slowing down.
The CBS reported that home prices fell 0.2% in January and February 2023 compared to the previous month. This comes after several months of slow-rising prices following interest rate hikes by the Bank of Israel. The price of new homes fell by 0.3%.
The last time there was a month-over-month fall in prices was during April-May 2020 as the COVID-19 pandemic began to impact the economy. Housing prices had been steadily rising over the past two years amid rampant inflation at home and abroad. In December, the statistics bureau stated that home prices had increased by 20% in September-October 2022 compared to the previous year. However, this figure has now dropped to 12.7% when comparing January-February 2023 to the same period in 2022.
While home prices fell by 1% or more in the south and Jerusalem, Haifa and Tel Aviv saw a decline of 0.5% each. Northern Israel saw a 2% increase in housing prices, and the central region surrounding Tel Aviv rose by 0.3%.
The Central Bureau of Statistics also released data indicating that inflationary pressures are still present, with consumer prices rising by 0.4% in March compared to the previous month. However, inflation has decreased by 0.2% over the last twelve months, as the CPI increased by 5% compared to 5.2% last month. This is the lowest annual inflation rate since September, when the index stood at 4.6%.
The biggest price increases during March were seen in clothing, shoes, poultry, and vacation rentals, while consumers spent less on fresh produce, disposable goods, fuel, and used cars.
The Bank of Israel has been increasing interest rates over the past year in an effort to reduce inflation, similar to moves by the US Federal Reserve. These policies have led to a steep drop in home sales, with mortgages totalling almost NIS 14 billion ($3.8 billion) less than a year ago, falling to less than fifty percent of that in January.
In its fight against inflation, the bank raised its benchmark rate to 4.5% and issued guidance showing that the judicial overhaul being pushed by the government could significantly harm economic growth. However, it has also forecasted that the economy could quickly recover should the issue be resolved in a way that reduces internal tensions and conflict. The bank predicted that the inflation rate could ease to 3.9% by the end of this year, versus the 3% forecasted in January, and move to 2.3% in 2024.