Tight supply will raise home prices

Bank Leumi stated, "Since the start of the year, there has been a rise in new home sales due to the increase in demand, while we're seeing that the present supply is insufficient to maintain the multi-year equilibrium without raising prices. It further adds that the interest rate hike by itself will not help to reduce housing prices, since it is necessary to increase the supply of new homes.

Apartment prices rose over the past 12 months because of the limited supply and the low interest rate, which rendered other investment instruments less worthwhile.

The Central Bureau of Statistics stated that there were 14,790 housing starts in the first half of 2009, 3.3% fewer than in the first half of 2008. It estimates that the current rate of housing starts will result in a shortfall of at least 8,000 homes compared with demand.