Prof. Amir Yaron, Governor of the Bank of Israel/Mark Israel Salem and Abshalom Sassoon
The entire economy was on alert during the day for the Bank of Israel's interest rate decision, when the optimistic forecasts in the market spoke of lowering the interest rate by at least 0.25%. However, contrary to expectations, the governor of the Bank of Israel decided to leave the interest rate unchanged (4.5%), similar to his decision the previous month.
How will the decision affect the residential housing and mortgage market?
These are the references of the experts:
The demand for new apartments will continue to soar
Maor Ohana, economist, CEO of Derchno, a mortgage consulting network (from the Ari Magorim Group), notes that the decision will increase the surge in demand for new apartments. According to him, "the new apartment market has seen a dramatic recovery in recent months, especially in projects that offer apartments for sale on paper. The reason for this is that the high interest rate has less impact on the buyers because of the financing deals offered by the entrepreneurs which mean in most cases that the buyers use the equity and are not required to take out a mortgage at the time of purchase. This is also the reason why we are witnessing the phenomenon that, despite the significant increase in the execution of transactions for the purchase of new apartments, the volumes of mortgages taken out in recent months have not increased accordingly."
"Because of the financing operations, there is currently a preference in the market for the purchase of new apartments, especially for apartments on paper whose delivery date is several years away. However, the high interest rate still has an effect on the second-hand apartment market, and this is reflected in the decrease in second-hand transactions compared to transactions for new apartments. According to the CBS data, in February almost half of the transactions in the market were transactions for the purchase of new apartments (48%), while in the corresponding period in 2023 the average rate of new transactions was 42% of the total number of transactions and in 2022 it was 39%. Leaving the interest rate unchanged will accelerate The trend of preferring the purchase of new apartments, which also allows housing developers to postpone the sale of the apartments they own close to the occupancy dates."
"The decision will not affect the recovery of the housing market"
Dror Obeh Zion, CEO and owner of Dera Marketing Real Estate, also responded to the Bank of Israel's interest rate decision: "The decision of the Governor of the Bank of Israel to keep the interest rate at 4.5% will not significantly affect demand in the real estate market, which is already in the process of recovery Accelerated and enjoying high demand, both from residential buyers and from investors who have recently returned to the market. Therefore, it seems that keeping the interest rate at 4.5% will not harm this trend."
"It seems that the governor chose a conservative approach in light of the complex security situation we have found ourselves in and the dollar rate which has strengthened significantly, which carries the potential for price increases. Our forecast and that of the investors in the market is that we foresee additional interest rate cuts later this year, which will increase demand in the face of a dwindling supply due to the slowdown in the pace of construction."
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"Maintaining the level of interest gives the housing market oxygen"
According to Adi Nino, CEO of Elder Mortgages, "The announcement of the second interest rate in 2024 does not dramatically change the real estate and mortgage market. The various statements about the expectation of a decrease in interest rates this year are expected to come true later this year. Due to the current situation, maintaining the status quo is currently the solution The best for all parties. This decision also probably stems from the increase in the dollar exchange rate and a reasonable inflation rate of 2.5% in February, which is within the target range of the Bank of Israel. Later this year we expect further interest rate cuts, which will affect the mortgage market mainly from a perception point of view. This will give The apartment-buying public has patience, and so do the sales managers in the field."
"In reality, the owners of a NIS 1 million mortgage, one third of which is the prime component, will benefit from each 1/4 percent reduction of about NIS 100 per month. Maintaining the interest rate level gives oxygen to the housing market despite the fear of the political and security situation and outlines a path for the market's recovery later this year. Recently, we Experiencing an increase in real estate sales and an increase in new mortgage applications. The data on the increase in contractor loans recently presented by the banks indicates the attractiveness of sales operations in the market. The continuation of the recovery is expected to materialize in the coming year, when projects that were sold a year ago under financing conditions of 20/80 will come to fruition. Then the market will be tested alongside the continued lowering of interest rates, when housing developers will realize existing assets and start paying for a new mortgage. Appropriate preparation of the households, especially with mortgage consultants, will allow the event to go smoothly without failures in financing transactions."
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