Housing prices have resumed their upward path, but at a lower rate than wages, according to the Bank of Israel's latest Financial Stability Report, published today. The report is published every six months. The report's authors say that housing prices rose 1.9% in the 12 months ending on August 31, "but in the longer term, housing prices have not risen in the past two years." Wages, on the other hand, rose by 2.5% in the 12 months ending on August 31, so the ability to buy a home has increased.
The Financial Stability Report is designed to assess the risk to stability posed by the real estate market, the credit market, liquidity, and the global economic environment. The new report states that no change occurred in the level of risk from any of these channels, and that the highest risk to the economy, rated high-to-medium, is posed by the credit market. This is good news for the Bank of Israel, given the calls to raise the interest rate out of concern that a low interest rate will cause a bubble in real estate prices that will jeopardize economic stability.
In this context, the Bank of Israel says that housing credit continues to grow, while the banking sector is greatly exposed to credit in the housing market. The annual increase in housing credit, almost all of which is provided by the banks, is 6.6%. According to the Bank of Israel, housing credit accounts for a substantial proportion of credit to households in Israel (65% of all credit to households is housing credit, compared with 50% in most developed countries). Housing debt in Israel, however, is low by global standards. The Bank of Israel says that monthly mortgage payments amount to an average of 26.4% of monthly income, which it regards as low. At the same time, the weighted real mortgage interest rate has fallen as a result of a decrease in the costs incurred by the banks in raising money.
Published by Globes, Israel business news - en.globes.co.il - on December 18, 2019
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