Bank Leumi's (TASE: LUMI) weekly economic review at Leumi Blog is not a herald of good news for renters in Israel. The bank believes that rents will continue to rise over the next 12 months, possibly even at a faster annualized rate than the rate in the October Consumer Price Index (CPI).
"Additional factors that are liable to cause rents to rise are the expected rise in yields on government bonds (investment in government bonds is an alternative to investment in real estate) during 2014 and the following years, and a rise in tax collection on rental income, which will probably be rolled onto tenants, in whole or in part," says Bank Leumi.
For these reasons, Bank Leumi believes that the housing component will continue to be the dominant factor in the rise in the CPI over the next 12 months.
Bank Leumi says that home prices were 0.6% higher in August-September compared with July-August, and that home prices have risen 10.1% over the past 12 months. "This is a rapid pace of price rises, which is due to high demand in view of the low interest rate on mortgages, and the low housing supply," it says.
At the same time, rents, on the basis of lease renewals, have risen by just 2.8% over the past 12 months. Analysis of the data over a longer period indicates that home prices rose by 63% over the past five years, compared with a 32% rise in rents.
Published by Globes [online], Israel business news - www.globes-online.com - on November 21, 2013
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