The Residential Property Price Index (RPPI) – Fourth Quarter 2022
The index has relatively stabilized
The PMA has released the results of its Residential Property Price Index in Palestine (RPPI) for the fourth quarter of 2022[1], which revealed relative stability in the overall index, recording about 113.7 points, very close to the previous level. This comes in light of marginal changes over the two sub-indices. The house price index has increased by only 0.4%, recording 118.7 points, while the index of apartment prices has declined by 0.9% to 106.3 points.
The index is experiencing price rigidity for the third consecutive quarter as it is shown in figure 1, indicating relative stability in real estate prices in Palestine. This could be attributed to the lower demand amid increasing uncertainty locally and globally and its impact on consumer and investor confidence, in addition to the hike of goods and services prices and the declining purchasing power of consumers. However, the index maintained a higher level compared to its corresponding value by around 4.4%.
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[1] The RPP index represents the overall trend of the average prices of apartments and houses in Palestine. For more information about the methodology, please see the working paper “Residential Property Price Index for Palestine”, PMA 2021 published on the PMA website, www.pma.ps.
Besides the interaction between supply and demand, the specification of the residential property plays a key role in determining its price. During the fourth quarter, more than half of the apartments for sale in Palestine were new with an average area of about 156 m2, and mainly contained three bedrooms, with less than three bathrooms, and a balcony. Meanwhile, the average area of the houses for sale declined to about 200 m2, half of them were new, and consisted of more than three bedrooms, and at least three bathrooms. The prices of residential properties are affected by other factors besides the above-mentioned, headed by the price of the land on which the property is located, in addition to the geographical location and neighborhood.
PMA issues the RPPI on a quarterly basis, with the aim of monitoring the real estate market and price fluctuations in order to avoid possible price bubbles. Moreover, the index is used as an input for economic policies, especially macroprudential policies, taking into account their important influence on individual decisions of consumption, savings, and investment.
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