1. Apartment prices will not rise forever. Someday it will stop. why? Because at a certain point almost no one in Israel will be able to buy an apartment, not even with a huge and monstrous mortgage. For the sake of illustration – if an average apartment costs NIS 10 million, how many young couples in Israel will be able to purchase an apartment? Not much, if at all.
The question is, of course, what is the maximum price that will not allow people to leverage themselves more, no matter how hard they try. Apparently this threshold is close – people are trying to make eights in the air in order to obtain financing – to mortgage the parents’ apartment, to take an additional loan beyond the mortgage, at the expense of a training fund or pension, in order to reach the minimum equity for the apartment, and to scrape money from friends and acquaintances. But at some point no matter how much money they manage to raise around – it just won’t be enough.
At this point, prices will stop, because no one will be able to purchase an apartment, and it is very possible that this threshold is close. The interest rate increases of the Bank of Israel in this respect bring us closer to this point, because when the monthly repayment increases then the percentage of the mortgage payment from the monthly income of the person/family also increases – and it is not possible to take out mortgages on which the repayment constitutes more than 50% of the family’s income (and rightfully so!) , so that fewer people can take out mortgages – to the point where no one can.
The problem is that it’s not that great of a comfort. It is about a situation where housing prices are so high that everyone simply despairs. We can only hope that the government will come to its senses and act much faster to increase the supply of apartments, to double and triple the population in the central area so that many more people will live in the center and will not have to come by car to the Tel Aviv metropolis (which will also greatly ease the traffic jams).
The State of Israel is growing at the fastest rate among all Western countries. There is a much higher birth rate here – and the meaning is that the population here is growing. That is why we need more and more apartments every year and this is a challenge that does not exist for other western countries. Will the government release barriers in the field of real estate and stop interfering? This is what needs to be done, but the politicians want to show ‘that they are doing something’ and want to bring ‘immediate results’ – and thus they mainly produce populist programs and lotteries such as a price for a tenant or an apartment at a discount – it is much easier than To do deep plowing work in the government offices. But the hard work whose results will only be seen in a few more years is what needs to be done. Are the politicians capable of this?
2. Bank of Israel interest – On Monday this week, the Bank of Israel raised the interest rate again and it is now 2.75%. This means that the public’s mortgage repayments became more expensive this week by another NIS 150-160. In total, and together with the jump in inflation, the monthly repayments became more expensive this year by more than NIS 1,000. the problem? It’s not over yet. Currently the prime interest rate already stands at 4.25% (it is defined as the Bank of Israel interest rate plus 1.5%) and the Bank of Israel interest rate is expected to continue to increase by at least another 0.75% within a year, so the prime interest rate is also expected to continue to rise and with it the mortgages will also continue to become more expensive. Here you can check how much your mortgage repayment cost.
3. Who is to blame for the rise in apartment prices? Bank of Israel Governor Prof. Amir Yaron said this week in an interview with Bizportal that the entire blame for the increase in housing prices cannot be placed on the Bank of Israel. According to him, the interest rate is only ‘responsible’ for about 20% of the increase in housing prices. Most of the increase in his opinion is attributed to the problems that exist in Israel and the insufficient action of the government.
In the interview, he also expressed sympathy with the public’s difficulty following the increase in interest rates, but explained that he has no choice: if he does not raise the interest rate now, in the future he will be forced to raise the interest rate to even higher levels. In this respect at least he is right. The problem is that the Bank of Israel itself abolished the prime limit on mortgages just before interest rates in the world began to rise – the Bank of Israel did not have to make this mistake, it did not have to fuel the real estate market and encourage taking out mortgages just before interest rates rose. Only the Bank of Israel is not ready Admit that they were wrong. The problem is the price of the Bank of Israel’s mistake – you pay the bank every month compound interest, which only gets more expensive due to interest rate increases.
In the meantime, here are real estate deals from the past week:
Rishon Lezion
3.5 room apartment on Kiryat Safar Street, 85 square meters, 2nd floor out of 4, sold for NIS 1.92 million
4-room apartment on Mefez Yoav Street, 106 square meters + 10 square meters of balcony + warehouse, floor 11 out of 12, with an elevator and 2 parking spaces, sold for NIS 2.83 million
Haifa
A 5.5-room apartment on Nurit Street in the Verdia neighborhood, 130 square meters, 4th floor out of 5, with an elevator and parking, was sold for NIS 2.59 million.
Jerusalem
A 5-room apartment on Kich Street in the center of the city, 127 square meters + 7 square meters of balcony +, 8 square meters of storage, floor 20 out of 24, with an elevator and parking, sold for NIS 5.5 million
5-room apartment, Kamon Street, Gila neighborhood, 87 square meters, 6 square meters balcony, 1st floor out of 5, parking, sold for NIS 2,465,000
3-room apartment, Zion Street, Kiryat Yuval neighborhood, 55 square meters, 12 square meters balcony, 2nd floor out of 5, sold for NIS 1,980,000
2-room apartment, Dahomey Street, Kiryat Menachem neighborhood, 40 square meters, 2nd floor out of 4, sold for NIS 1,465,000
streets
5-room apartment on Bar Kochba Street, 120 square meters + 12 square meters of balcony, 5th floor out of 9, with double parking and an elevator, sold for NIS 2.5 million
Tel Aviv
5-room apartment, After Street, Lemad plan, 115 square meters, 10 square meters balcony, 6th floor out of 9, parking, elevator, sold for NIS 5,400,000
4-room apartment, Machal Street, Neve Eliezer neighborhood, 94 square meters, 10 square meters balcony, 1st floor out of 10, parking, elevator, sold for NIS 2,750,000
Beer Sheva
4-room apartment, Yehoshua Yavin Street, Neve Ze’ev neighborhood, 124 square meters, 2nd floor out of 8, parking, elevator, sold for NIS 1,300,000
3-room apartment, Tabankin St., neighborhood E, 76 square meters, 4th floor out of 4, sold for NIS 753,000
3-room apartment, Modi’in Alley Street, Neighborhood D, 69 square meters, 2nd floor out of 3, sold for NIS 843,000
Bat Yam
3-room apartment, Kibbutz Galuyot Street, 95 square meters, 6 square meters balcony, ground floor out of 2, sold for NIS 2,100,000
Holon
3.5 room apartment, Chaletz Street, 75 square meters, 4th floor out of 8, elevator, sold for NIS 1,920,000
Modiin – Maccabim
4.5 room apartment, Techelet Street, Avni Hen neighborhood, 102 square meters, 13 square meter balcony, 3rd floor out of 3, parking, elevator, sold for NIS 3,435,000
7-room villa, Egor Street, Maccabim, 200 square meters built on a 600 square meter lot, parking, sold for NIS 7,500,000
Nahariya
5-room penthouse, Arlozorov Street, 200 square meters, 3rd floor out of 3, parking, elevator, sold for NIS 3,180,000
Acre
4-room apartment, Herzl Street, 95 square meters, 14 square meters balcony, ground floor out of 5, parking, sold for NIS 1,090,000
Kiryat Malachi
3-room apartment, Shimon Peres Street, 84 square meters, 16 square meters balcony, 3rd floor out of 7, parking, elevator, sold for NIS 1,430,000
The data was collected from Rimex, Anglo Saxon and the Tax Authority data.