The mortgage market is waking up, following the cancelation of the 0% VAT housing program. Banking sources said that mortgage taking was up 10-15%, compared with the multi-year average for the month. The banks predict that this trend will continue and intensify, with strong results in December 2014-February 2015.
"The feeling is that the bottleneck is being released, since the uncertainty about 0% VAT has been removed. Even if the program is resuscitated after the elections, assessments are that it will not go into effect before next summer. Some of those apartment purchasers who were sitting on the fence therefore decided that they would wait no longer," one banking source said. December has traditionally been a strong month in the mortgage market. Banks bolster their mortgage marketing efforts in order to meet their targets for the year, and December is a long month without any vacation days (bank branches work as usual during the Hanukah holiday). Last December, the volume of mortgages totaled NIS 4.7 billion. If the banks' predictions are borne out, December mortgages may well exceed the NIS 5 billion mark.
The banks believe that the interest rate, currently at a historic low, is another factor boosting the mortgage market. It is believed that the interest rate will drop no further, and it is therefore best to take a mortgage now, before the interest rate rises. Former Minister of Finance Yair Lapid announced a 0% VAT program this year granting a VAT exemption on first apartment purchases up to a NIS 1.6 million purchase price. The program caused a slowdown in sales of first apartments, and the effect also trickled into the secondhand apartment market. Nevertheless, mortgage market figures were good, with NIS 4.2 billion in mortgages taken per month. 2014 is expected to end with mortgages totaling over NIS 50 billion. At the same time, following a number of years with consecutive steep rises, the rate of increase in mortgages remains about the same as in 2013.
Market sources predicted that implementation of the 0% VAT program would reinvigorate the mortgage market and increase the rate of mortgages taken. In the end, it appears that the plan has been shelved for the present, but the effect is the same: the uncertainty has been removed, and the same people who were sitting on the fence are now gradually returning to the market. The contractors also reported an increase in sales last week, and some even said that they saw a mass movement. At the same time, other contractor sources said that the descriptions were exaggerated, and that the increase was not as great as described.
Published by Globes [online], Israel business news - www.globes-online.com - on December 9, 2014
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