The real estate market underwent a storm last week, following ostensibly contradictory data published by the Central Bureau of Statistics and by the Chief Government Appraiser. While the former reported that home prices declined 1.3% in the second quarter of 2016, the government appraiser published a report indicating a 2.5% rise in prices during the exact same period. This media storm also had a political effect, when Minister of Finance Moshe Kahlon's close circle advisors, who obviously did not like the data indicating that prices continued rising despite Ministry of Finance efforts to cool the market, lashed out at the Chief Government Appraiser and the report he published.
"I verify the quality of the data"
"You have to know how to read the data correctly," explains Chief Government Appraiser Tal Alderotti. "Central Bureau of Statistics data updated every month (index of owned apartment prices) also reported a 1.4% rise in home prices in April, a 0.4% rise in May and a 0.3% decline in June. A misunderstanding of the data has led to this unnecessary media racket." The contradictory Central Bureau of Statistics data that was part of its quarterly review, "average prices of owned apartments", examines all transactions in 67 cities and villages in Israel, and reflected a 1.3% price reduction.
The main criticism in the Ministry of Finance is that your report is limited. It includes only four-room apartments in 16 cities.
"Our data are robust enough to reflect the mood in the housing market. Four-room apartments are still a normative, common product which is subject to the least bias of very large or limited sizes characteristic of premium or particularly small apartments. Four-room apartments in Israel's big cities are usually standard apartments with no improvements - expansions or gardens - and are therefore the product which I believe best reflects the reality of the real estate market. This differs from other reviews which consider multiple parameters and are therefore more prone to biases and deviations."
Alderotti adds, "Our review relies on real data on apartments sold and reported to the tax authorities, as required by the law, rather than on any other data. Moreover, in cases in which I, as an appraiser, encounter deals that do not seem to make any sense, such as a 30 square meter, 4-room, apartment, I do not include it in the review in order to avoid a deviation from the real data. Furthermore, if I encounter multiple sales at the same location, I turn to appraisers who work in this city and check whether there was a presale of a certain contractor in a specific project, receive the relevant information and know how to handle the data correctly. I actually verify the quality of the data."
MK Roy Folkman from Kulanu said that your review is biased, your data is problematic and that you are giving in to pressure from contractors.
"I appreciate MK Folkman and his work, but it is a shame that these things has been said and the truth is that they are not worthy of a response. Our index has been uniform and consistent for nine years, and if people read the data correctly and also check past data, they will see that eventually Center Bureau of Statistics and Chief Government Appraiser data has always been similar, indicative of the same trend."
Does government ministries' interest in seeing a drop in home prices affect the responses?
"I am certain that everyone in the government, as well as most of the public, yearn to see apartment prices stabilizing to a more sane level. However, I do not think that it is correct to force the data and the facts to match our wishes. I think that the government has the capability and the determination, which will eventually lead it to realize its objectives. You cannot doubt the government's determination and you have to believe in its capabilities."
Only 2,000 buyer's price apartments
Among other things, Folkman has criticized Alderotti for not including the marketing of 17,000 Buyer's Fixed Price program (Mehir Lamishtaken) discount apartments in his data. The chief appraiser says, "You cannot include 17,000 homes that have been marketed to developers but have not yet been marketed to eligible apartment buyers. Only 2,000 apartments have been marketed to buyers."
You think that the Buyer's Fixed Price program will affect prices?
Not at this stage. The Buyer's Fixed Price Program is expected to include all plots marketed by the state, estimated at 70,000 houses, but will provide a significant discount only to the specific population sector eligible to enjoy them; at present, only 2,000 apartments have been sold to eligible apartment buyers, with a completed sale deal. The rest of the apartments have only been marketed to developers, and it will take a long time until they reach the eligible buyers, and only then we will be able to treat them as sale deals. At present, 2,000 deals in Lod, in Kurdani (Kiryat Motzkin) or in Afula do not affect the market."
And when all 70,000 homes will be marketed to eligible people?
"First of all, it seems that it will take a lot of time until those projects become sale deals for eligible people and even then, it will be wrong to include these transactions in market prices. They should be treated as transactions involving a substantial discount provided by the government to a specific population. Theoretically, an eligible person would be able to sell the apartment the next day - even if this results in a fine - according to the market value.
"The real test of Mehir Lamishtaken will only be when we examine whether the large number of apartments sold to eligible people in the future will affect the price of other apartments on the free market which are not subject to a government discount. If you ask me, this will be the next war, whether to include buyer's price data in the analysis or not."
Published by Globes [online], Israel business news - www.globes-online.com - on August 22, 2016
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