"The new directives from the Bank of Israel will not influence apartment prices," said Union Bank of Israel (TASE: UNON) CEO Haim Freilichman, responding to last night's publication of new rules, which make mortgages more expensive.
He added, "If the Bank of Israel's instructions are just one measure and not part of an overall package, then there won't be a substantial influence. There is no doubt that interest on mortgages will rise by between 0.5-1% on those loans affected by the instructions. This is because of the need to allocate capital of 100% but we are only talking about 15-20% of mortgages. Regarding the price of apartments, I don't think that the directives will have an influence. If they will reduce demand because of the more expensive mortgages, perhaps house prices will not continue going up. But you have to distinguish between types of apartments and people that buy apartments and people that buy luxury homes are not necessarily people that also take a mortgage.
What can influence prices?
Freilichman said, "Taxing apartments for investment can influence demand but I'm against such a step because overall real estate taxes are already high enough today. Only increasing the supply of apartments will solve the problem. Whoever wants to live in the center of Israel will have to pay higher prices. But if the aim is to help young couples there must be focused and local measures in specific places, not in the center. To direct young couples there prices must be attractive."
Published by Globes, Israel business news - www.globes-online.com - on October 26, 2010
© Copyright of Globes Publisher Itonut (1983) Ltd. 2010