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We all know the concept of the American reality show that is successful all over the world, The Amazing Race, or as it is known in Israel, the "Race to the Million".
And for those who don't: it's a competition between several teams of 2 people, during which they go through different countries around the world.
The goal of the teams is to reach the finish line first, to avoid a relegation situation.
Each pair of contestants must complete a certain number of tasks and challenges in order to succeed.
How does this relate to our economy?
In April 2022, the central banks of the countries entered a global competition, with the goal being to curb inflation.
What it means?
We checked through mortgage consultant and economist Moti Shoika.
Governor of the Bank of Israel: represents us in the global competition of central banks/Flash 90, Flash 90
"If during the Corona period we were all locked in our homes, after we got out of it we started buying at a dizzying pace, which caused inflation to run rampant and prices to rise. This is what actually caused the central banks of the world to enter the million race competition, with the goal - curbing inflation," says Shoika.
"In order to win the competition, all the central banks in the world started raising interest rates in order to curb inflation. In Israel, inflation reached almost 6%, in the USA the inflation rate exceeded 9%, in the UK it exceeded 10%.
In response, the central banks gave gas, they didn't stop raising the interest rate in the economy until they saw that it was good, and that the moves they are making are indeed bearing fruit and curbing inflation." "
We have been without interest rate increases at all the banks for almost six months, and we even saw the first interest rate drop of 0.25 % in the recent decision of the governor of the Bank of Israel, which I think came mainly to signal something to the government, and not because the governor really wanted to lower interest rates."
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The first stage of the competition is complete, what is the next stage?
"We passed the first stage of the competition, everyone moved on to the next stage," says Shoika.
"What is the next step? First, to control the rate of price increases, lest inflation develop here again. This is currently being done by the fact that all the central banks are not in a hurry to lower interest rates now, they will wait and wait until they know with almost complete certainty that the price rampage is behind us."
"The second goal is to lower interest rates. When will it arrive? The million dollar question. If it depended solely on the banks, then we can say with certainty that here it is, we are already nearing the long-awaited finale. But it does not depend solely on the central banks, there are global influences that will enter As part of the considerations. If it is the Houthis from Yemen who influence the transportation of goods, regional wars and more."
"If we talk for a moment only about our team in the program, the State of Israel is currently in total uncertainty. The war that is developing, the fluctuating dollar exchange rate, and other factors make it difficult to predict the interest rate for 2024, but if we still have to predict, there will probably be a cumulative interest rate reduction of up to 1% in the coming year".
The last step: how will this affect our housing market?
"Upon reaching the finals of the global competition, the question arises as to where this puts us in the housing market: first of all, we have to take into account that history shows that after wars there is a revival in the economy and the real estate market, when everyone returns to their original plan.
The war will affect the housing market in other ways, in terms of positive immigration to the country due to anti-Semitism around the world, which will increase the demand for apartments and so will the prices, since many entrepreneurs do not approach the tenders for the purchase of Rami land until the fury of interest passes, which will cause a shortage of a number More years in the supply of apartments."
"However, as we mentioned earlier, this year we will most likely see a significant relative interest rate reduction, which will bring the market back to activity both on the part of the entrepreneurs and contractors, and on the part of the buyers. I believe that anyone who buys an apartment now and will not wait for the rampant prices to arrive, whether it is for residential purposes or if for investment purposes".
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