End of the housing bubble?

Data released by the Bank of Israel on Monday showed the first meaningful decline in housing prices after a year and a half of nearly continuous increases.

Housing prices in Israel fell by half a percent in January, the largest decrease since the summer of 2014. The Bank of Israel report noted that the consumer price index also declined by 0.5%, marking the third straight month of deflation

The report also suggested that economic growth and employment levels appear to be stable despite a weakening global economy which has reduced exports. 

Given the relative stability of the Israeli economy, the decline in housing prices may suggest that the long-awaited leveling off of the housing market may finally have arrived.

Since 2011, housing prices have risen steadily, driven in part by declining interest rates. After a softening of the housing market in 2011, the Bank of Israel consistently lowered its lending rates from 2012 through 2015, dropping its benchmark rate from 2.75% in 2012 to the historic low of 0.1% in 2015.

Increased access to mortgages fueled a general rise in housing prices through 2015, but with near-zero interest rates already, the Bank of Israel has left the rate untouched for the past 12 months.

Barring the kinds of negative inflation rates now found in countries like Japan and Denmark, the Bank of Israel has little room left to reduce rates any further, in which case this very well may finally mark the long awaited end to Israel’s four-year housing bubble.

Source: http://www.israelnationalnews.com/News/News.aspx/208392

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