Residential building/ShutterStock
Although there was an expectation in the market for another interest rate cut, the Bank of Israel announced today (Mon) that the interest rate in the economy will remain unchanged and will continue to stand at 4.5%, this after last month it recorded a decrease of 0.25%, for the first time since the outbreak of the corona epidemic in April 2020.
Mortgage consultant Daniel Zandani , a franchisee in the Darcho network for mortgage advice, explains that the governor's decision not to lower the interest rate has a direct impact on the second-hand apartment market, which, according to the CBS, activity in it continues to decrease in recent months, compared to the new apartment market.
According to him, in the first months of the interest rate increase (starting in April 2022 ) it caused a halt in demand for new apartments both due to the increase in financing costs and due to the fear that the interest rate would continue to rise. The entrepreneurs realized that in order to sell new apartments they must neutralize the effect of the interest rate, therefore today most entrepreneurs offer new apartments on payment terms in which the buyer pays a minimum amount at the time of purchase (up to 20% of the price of the apartment, but there are also entrepreneurs who also allow an initial payment of 5% and 10%) and the remaining payment upon occupancy.
This means that the buyers can pay the initial payment from the equity they have and postpone taking out the mortgage until a later date when the interest rate will be lower. At the same time They can benefit from the increase in the value of the apartments.
Mortgage consultant Daniel Zandani, franchisee in the Darcho network for mortgage consulting/PR
According to Zandani, the benefits that the developers are giving today have caused investors to switch from buying second-hand apartments to buying new apartments in the presale stages, the delivery date of which is in another three or four years.
Besides reducing the risks, this benefit offered by developers today represents a significant discount on the price of the apartment since the developer absorbs the interest cost.
On the other hand, when purchasing a second-hand apartment, the buyer needs a mortgage loan from day one, and although he can also benefit from the rent, due to the high interest rate, in many cases the rent does not cover the mortgage repayment.
As mentioned, according to the recently published data of the Central Bank referring to the year 2023 - 47% of the transactions were in the new apartment market, compared to an average of 39% transactions with contractors in 2022. Zandani estimates that the trend of increasing the proportion of new apartments in the total number of transactions will continue to increase in the coming months As long as the high interest rate environment does not decrease and the entrepreneurs will continue to give benefits in the field of financing.
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