Home prices are continuing to rise. The Central Bureau of Statistics' Prices of Dwellings Index, which the Bank of Israel uses to set its macroprudential policy (limiting mortgages in the housing market), rose by 0.6% in July 2013 to an all-time high of 323.8 points.
The rise in home prices in July follows an 0.7% increase in June. Home prices rose by 11.6% in January-July and by 9.3% in the 12 months through July (similar to the increase in the 12 months through June).
Home prices have risen 82.6% since the start of the price surge in May 2007. In this period, prices fell in only 11 of the 74 months, and in most cases, the drop was negligible. Home price fell by over 1% only once - a 1.2% drop in October 2007.
A new study published by the Bank of Israel on Sunday warns of the consequences of a real estate bubble due to the inflation of the mortgage market. The researchers say that the proportion of high-risk mortgages (in which the monthly payment exceeds 40% of a household's disposable income) is at an all-time high, and that Israelis' average monthly mortgage payment to income ratio is higher than in the US and Europe. The researchers also warn that in a scenario of rising interest rates or a recession, a mortgage crisis, like the ones which have hit other countries, is possible.
Published by Globes [online], Israel business news - www.globes-online.com - on September 16, 2013
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