"The steps taken to reduce the demand and increase the supply of houses have still not made a sufficient impact, and house prices continued to increase rapidly, although at a slower pace than in 2010," states the Bank of Israel in its Survey of Recent Economic Developments - January to April 2011.
The Bank of Israel says, "Demand for apartments and activity in the construction industry continued to grow… It appears that the rise in the interest rate has reduced the demand for apartments for investment purposes. Housing prices increased by 14% over the past year, as opposed to 20% for 2010 as a whole." It adds, that the number of mortgages increased, apartment prices grew more rapidly than rental prices, and while housing starts are up, a shortage of skilled labor resulted in drop in housing completions.
The Bank of Israel says that the Israeli economy continued to grow in January-April, but that inflation still exceeded the 1-3% target range, mainly because of prices of housing, transportation, and food. Inflation expectations, while also high, are coming down to the inflation target ceiling following the 50-basis point interest rate hike in April. The unemployment rate fell to 6% - a 25-year low
On the international front, the Bank of Israel warns of problems in the US and EU. "The US economy grew at a slower rate; the difficulties in the employment market continued, and no solution seems in sight for the burgeoning budgetary deficit. The debt crisis in European countries continued to cloud the European recovery," it notes.
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