The large decrease in mortgages is gaining momentum, and last month there was a 49% decrease in the volume of mortgages taken, compared to February of last yeare, and a return to the level of mortgages taken 4 years ago. This is according to data from the Bank of Israel. Among the explanations for the great fall in mortgages are the interest rate hikes and the consequences of the legal revolution that is going through the country, weaving an atmosphere of instability and uncertainty over the Israeli economy.
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Last month, NIS 5.73 billion in mortgages were taken from the banks. This is the lowest volume of mortgages since the first corona shutdown that paralyzed the economy in April 2020. The volume is similar to that taken in the second half of 2019, however, given that apartment prices have since risen by more than 35%, it indicates a huge drop in the amount of apartments purchased in February.
The new apartment market is sliding into the heaviest recession in recent decades
In the previous months we reported a consistent decrease in the level of mortgages taken out. Between November 2022 and January 2023, there was a 30-40% decrease in the volume of mortgages taken, compared to the corresponding months in previous years (in October the decrease was 43% due to the Tishrei holidays). The current decrease is much higher, and therefore it seems that not only the interest rate increase procedure explains the figure and that the general atmosphere in the country apparently affects the real estate market as well.
The Bank of Israel has not yet published the segmentation of these mortgages by sectors (investors, purchasers at the price per tenant and purchasers of single apartments on the free market), however in recent months there has been a large decrease in all these sectors.
As we wrote previously, even without this, the new apartment market is sliding into the heaviest recession in recent decades, and the mortgage data for February 2023 raises concerns that the recession will be more severe than previously expected.