This time it is a true alarm: the real estate market in Israel is about to change
If in the last 16 years the market has not stopped rising, the rise in interest rates, which according to all estimates is expected to continue, together with other factors may put us in a less familiar reality (at every possible score)
Nir Shmol, guest column
Wednesday, 06 July 2022, 08:24
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The rise in interest rates, which follows a record inflation in many countries around the world, including the United States and many EU countries, some of them a negative 40-year record, is also reaching Israel these days and puts the real estate market on hold. 0.5 percent said that the interest rate is expected to rise to at least 2.75 percent in the coming year.
It is important to add that not only is the interest rate set by the Bank of Israel rising, but the margins that the banks take from mortgage customers and also from entrepreneurs on the interest rate set by the Bank of Israel.
That is, the real rise in interest rates is not only half a percent as an example from yesterday, but the banks are raising their bank margin while another interest rate to price their risk that rises in cases of non-repayment of loans or alternatively the cost of raising their capital which also rises.
More on Walla!
When will it stop?
Raising interest rates, the consequences for the pocket and the worrying future
To the full article
Are we entering unfamiliar territory (Photo: Reuven Castro)
Indeed, today we see many customers who have received mortgage offers at a certain interest rate and now the banks are raising the interest rate.
Even real estate developers who have taken out many loans are now forced to recalculate their path.
It is important to understand that when an apartment becomes more expensive, the next lot that the developer buys also becomes more expensive, so the amount of the excess profit is zero.
Buyers sit on the fence
In the current reality in real estate, buyers are sitting on the fence and the time required to complete each transaction has lengthened compared to previous months. There is a decrease in the number of transactions compared to past months. Deciding whether to buy an apartment now would be much more difficult for buyers compared to the not-so-distant past months.In
terms of apartment prices it is important to say that there is no decrease in apartment prices On the construction input index only to 40 percent of the purchase cost, compared to 100 percent in the previous situation.
Wall Street is nervous, and that too can have an effect (Photo: GettyImages, Spencer Platt)
The market in Israel for the past 16 years has enjoyed high demand versus supply and prices have not stopped rising every year at an increasing rate, but once the rules of the game have changed and the era of cheap money is over, we see sharp declines in the capital market, rising highs, high inflation And fear of a global and local recession.
The supply of real estate in Israel and the expectation of the future
Nir Shmol (Photo: Tomer Feder)
Israeli researchers Amos Tversky and Daniel Kahneman received their Nobel Prize in the psychology of economics, and the big question in today's market is whether the urge to buy apartments will overcome the fear of buying real estate during this period or vice versa, in the coming months we can get the answer. These days a functioning government in Israel after the Knesset dissolved and we are entering election number 5 in the last three years increases the
CEO of the Urban Development and Renewal Company and Snir.
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