Housing Market in Israel: Is there a Bubble?

  • Philip Arestis University of Cambridge, UK
  • Ana Rosa Gonzalez-Martinez ECORYS, The Netherlands

Abstract

House prices in Israel have registered unprecedented growth rates in the last few years. At first glance, these hikes could be explained by the evolution of fundamentals such strong population growth and favourable macroeconomic conditions, i.e. low interest rates. However, further investigation is needed in order to explore whether there is a misalignment between house prices and their fundamentals. Firstly, this paper investigates the role of construction costs in the evolution of house prices. Secondly, this contribution decomposes the “price-to-rent” ratio into fundamentals, frictions and bubble episodes for a better understanding of the recent trends of the market.


Key words: House prices, Housing bubble, Cointegration, Israel.
JEL: C22, R31.


Cene nekretnina u Izraelu su zabeležile neverovatne stope rasta poslednjih nekoliko godina. Na prvi pogled, ovakav rast može biti objašnjen evolucijom fundamenata kao što su snažan rast stanovništva i povoljni makroekonomski uslovi, tj. niska kamatna stopa. Međutim, dalje ispitivanje je neophodno kako bi se utvrdilo da li postoji neslaganje između cena nekretnina i njihovih fundamenata. Prvo, u radu se istražuje uloga troškova izgradnje u evoluciji cena nekretnina. Drugo, ovaj doprinos dekomponuje odnos “cena za rentiranje” na fundamente, frikcije i epizode mehura kako bi se bolje razumeli skorašnji tržišni trendovi.


Ključne reči: cene nekretnina, mehur nekretnina, kointegracija, Izrael.

How to Cite
Arestis P., & Gonzalez-Martinez A. (2017). Housing Market in Israel: Is there a Bubble? Panoeconomicus, 64(1), 1-16. doi:10.2298/PAN1701001A
Section
Original scientific paper