The Bank of Israel estimates that Israel's Jewish sector will need an additional 35,000-36,000 homes per year through 2019. The estimate is based on Jewish demographics, including population growth and changes in the age composition. It adds that the need for additional housing has been decreasing steadily, although not continuously over the past decade, and was about 40,000 homes in 2010.
The Bank of Israel said, "The housing needs of the population as derived from demographic fundamentals and the extent of building starts needed to meet these needs are of great importance in planning and policy. Interest in them has been growing in recent years, due to the steep increase in home prices and the possibility that a shortage of homes relative to the population’s needs - along with other factors, including low interest rates - contributed to this increase.
"The estimate distinguishes between demographic processes that create a need for homes (young people joining the adult population, and immigration) and those that cause dwellings to be vacated (mortality and emigration). The difference between the two is the net annual (demographic) need for more homes."
The Bank of Israel notes, "Most of the annual increase derives from growth of the 29+ age group."
The Bank of Israel says, "There is a wide range of estimates of the cumulative shortage in homes. To calculate this shortage, the discrepancy between needs and building starts should be tallied only from the point in time when the existing stock together with building starts did not suffice to satisfy the needs, that iscreation of a shortage which pressured prices upward. This calculation is sensitive to the assumption regarding the timing of the turning point, which in our assessment was between 2005 and 2007. The cumulative shortage in 2008-2011 is estimated at 30,000 homes. If the turning point had occurred in late 2006, the cumulative shortage by 2011 would have been 40,000 dwellings. The comparison of needs to building starts biases the estimate of the shortage of homes upward, because supply responds to the increase in demand not only through building starts, but also through populating vacant homes, splitting homes, etc.
"This estimate of the cumulative shortage of homes exceeds estimates based on two other approaches that were tested. According to an approach based on restoring the ratio of population to inventory of homes to its 2007 level, the cumulative shortage in the Jewish sector in 2011 was only 7,500 dwellings. According to the approach which totals the discrepancy between the annual increase in households and the number of building starts, the cumulative shortage since 2007 totals 13,000 homes."
Published by Globes [online], Israel business news - www.globes-online.com - on June 13, 2012
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