The moment after the security threat is removed, we will see a boom in the north boosted by large demands from foreign residents, and we will see more immigration files being opened and great interest in the real estate market," Bank Leumi Mortgage Division head Uri Yonissi told "Globes" news editor Bar Lavi, during the "Talking North" conference held by "Globes" and Bank Leumi in Akko. He added, "Before immigrating, people make sure they have somewhere to go, and the first deal they do is a real estate deal, and we see a boom all over the country, with an emphasis on the periphery."
Yonissi stressed that housing prices will continue to rise not only because of these demands, but because Israel has a shortage of 130,000 apartments. "This is a gap that has been created over 15 years and more, and there is excess demand that will not be closed in a year or two." This is also the reply he gave to Lavi's question about the rising housing prices with the average mortgage exceeding NIS 1 million, at a time when Israel's north has been evacuated and is suffering uncertainty.
"There were expectations that housing prices would fall in a year when interest rates rose dramatically, and that didn't happen," Yonissi said. "People realized that the interest rate would not drop significantly, so we started to see a return of buyers to the market. There is a lot of demand and deals, and as a result the housing price index rose 4.4%, despite the situation in both the north and south."
"Boom in the south, uncertainty in the north"
Yonissi continued, "There is currently a boom in the south: investors are coming, and people are coming because they understand that the threat in the south is close to being over. On the other hand, in the north we see uncertainty, and we are still witnessing lively activity here, contrary to what we would have expected, but it cannot be compared with the trend in the south. There are very many evacuees pushing up rent prices in the center, but they understand that people will return to live here, so today they are stocking up on apartments, with the understanding that new apartments will not be ready within months but within a year or two, and they are cheap compared with the center of the country."
We have recently seen government bond returns rising. Does this affect mortgage takers?
"Mortgage takers have suffered over the last two years with their mortgage repayments. It started as a result of the outbreak of the war in Ukraine, which created an inflationary process in the world and in Israel. Here the trend was more modest, and this meant that the economists had to raise the interest rate less dramatically, in a way that affected the monetary interest rate and bonds and we have another parameter in the cost of risk as a result of the fact that the country is in an extreme security situation. The rating of the State of Israel by a number of companies has been cut, and this is part of the phenomenon. Due to the fact that the interest rates have increased, the profits of the banks have decreased considerably, and there is significant competition. So it's not certain that the mortgagees were harmed, and maybe even the other way around."
"The market is more competitive"
You talk about competition in the mortgage market, but the State Comptroller criticized the behavior of consumers who go to the bank, receive an offer and sign, without comparing prices. Is this still the case?
"Absolutely not. The mortgage market is one of the most competitive in Israel, and there are 3,000 mortgage advisors who check the mix and not just the price. A bank that knows how to match the right deal to the customer is the bank that provides the right solution. A mortgage is the largest financial transaction of households over the long term, and you have to take it seriously, not only according to the price but according to its structure. Today there are at least five tracks, and according to research, every customer today checks between two and three banks before taking a mortgage."
The promotions offered by contractors include the sale of new apartments under payment terms of 20% when signing the purchase contract and 80% when the project is occupied. But Yonissi does not agree with the assumption that they change or distort the situation in the real estate market. "It is a common procedure to tell a customer, who is mainly buying a bigger home, come and give equity and then pay off the rest with a mortgage. In the last six months, many contractors, in order to avoid significant financing costs, wanted to advance client payments to them, and agreed to a process in which financial discounts are made by subsidizing part of the interest of the mortgage. That is, the contractors are willing to subsidize it until the apartment is occupied, and this is a practice that has been used here for many years, and everything is done responsibly. When the bank looks at such a deal, it looks at it in the long term, so that the customer who enters into the deal also knows how to complete it."
Full disclosure: The conference was held in conjunction with Bank Leumi.
Published by Globes, Israel business news - en.globes.co.il - on June 26, 2024.
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