Bethel Finance: Leumi sees rents continuing upwards in 2012

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Housing prices, as measured by the Consumer Price Index (CPI) on the basis of prices of monthly rental contracts, will likely rise in 2012, says Bank Leumi's research department, headed by Dr. Gil Michael Bufman.

"Prices will rise, as homebuyers switch to the rental market," says Cedric Marmet (Bethel Finance Ltd). "It is possible that this trend strengthened in January, due to seasonal factors."

Bank Leumi does not mention home prices that do not appear in the index. The Central Bureau of Statistics reports that home price rose by 0.6% in December 2011, after falling for three consecutive months.

The CPI for January was unchanged, belying analysts' expectations of a fall of 0.25. Inflation for the 12 preceding months was 2%, exactly at the mid-point of the government's 1-3% inflation target range.

The housing item in the CPI (rent) rose by 0.5% in January, after falling for several months. "As for the housing item, we note that the rise in rent in January bucked the seasonal factors for this month, which is characterized by few transactions, which is why prices fall," says Bank Leumi.

As for the inflation figures, Bank Leumi says, "The rate of the rise in prices will pick up during the year toward the upper limit of price stability target, due to rises in housing prices in the CPI, as measured on prices in new rental contracts, rising prices for price-controlled goods, such as electricity for domestic consumption, a possible rise in prices of imported goods, due to the depreciation of the shekel, and a possible further rise in the price of oil."