Now remember? This is how raising interest rates will affect homebuyers' pockets Israel today

The main culprit in inflating the real estate bubble in Israel is the Bank of Israel.

The zero interest rate policy he pursued for about three and a half years has been a major factor in the rise of housing prices in Israel to historic highs.

Mortgages, too, must not be forgotten, have already risen in price by tens of thousands of shekels since the beginning of the year - and the market is still burning.   

The Bank of Israel announced yesterday (Sunday) that it will raise the interest rate, which currently stands at 0.1%, after two years in which the interest rate remained unchanged.

The main reason for the move is the high inflation in the economy, or in other words, the rate of price increase which exceeded the Bank of Israel's target range. 

The question being asked is: What will a 0.25% increase do now?

A minor increase that will bring the frame to 1.75% will probably do less, but not in the current situation where it is known that this is only the first increase in a wave of interest rate increases, the purpose of which is to cool the market.   

The real estate market has already calmed down a bit in terms of the "attack" on apartments, that is true, but on the other hand it must not be forgotten that the supply of available and ready-to-live-in apartments has also dropped drastically among contractors.

Everyone reports that there are not many apartments left for sale, and the chief economist at the Ministry of Finance even recently announced that the contractors now feed on "on paper" apartments, which are sold in any case at presale prices.   

Fewer classes, less family fun 

I look at those young people who "dared" and took out leveraged mortgages with six zeros.

It is quite clear that any increase, even in the hundreds of shekels, will affect the cost of living.

Another 1,000 shekels a month means one class less for a child, less travel in the family car, less entertainment on the weekends.

Supply and demand.

That's the whole story.

The "herd law" also has a psychological effect on the real estate market.

When the market rises, buyers - for fear that the continuation will rise more.

When the market falls - wait for it to fall further. 

It is known that as long as the rate of construction starts is lower than the rate of population growth, prices will continue to rise.

On the other hand, contractors have already approached future construction tenders.

All those projects that are reflected in apartment prices in the next two years.

And they paid unrealistic prices for them;

If in Ramat Hasharon the prices were NIS 30,000 per square meter, today they are already approaching NIS 50,000 per square meter and more, thanks to these tenders.

In Yehud, Or Yehuda and even Be'er Sheva and Tiberias, prices are also jumping.

So the rise in fuel and the rise in interest rates are one thing - harm to the cost of living.

Will the housing market cool down?

We all strive for that.

The contractors, too, it turns out.

But the rise in raw materials by hundreds of percent and the construction inputs that have risen in price following the change in world order have shown that these factors have a greater effect on price increases than the negligible mortgage interest rate.

Sea transport is becoming more expensive, aluminum iron and concrete are rising at unprecedented costs.

The construction input index is more frightening today than the rise in mortgages.

The solutions?

As I always say - just a change of disk in the head.

Not to buy an apartment - but to rent for ten and twenty years.

And also rapid urban renewal.

Will it happen in our country?

Yes but at a deer-turtle pace.

Unfortunately. 

Were we wrong?

Fixed!

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