With record-low interest rates, April again looks like being a strong month for new mortgage taking. Banking sources estimate that between NIS 4.2 and 4.4 billion in new mortgages would have been taken by the end of the month. Although this is slightly below the average of NIS 4.5 billion over the past 12 months, it is a high amount considering so many holidays fell in April, and is up from April 2014 when less than NIS 4 billion in new mortgages was taken.
The high mortgage taking figure reflects a continued boom in the real estate sector, which peaked in March when new mortgage taking reached NIS 5.6 billion. The trend has began in December when former Minister of Finance Yair Lapid's 0% VAT plan on new homes was cancelled. NIS 4.57 billion in new mortgages were taken in January and NIS 4.62 billion in February.
Banking sources believe that the boom will continue in the coming months. A senior banking source said, "The way it seems at the moment, 2015 is certainly looking like a record year in the sector. Last year we saw a fall in the number of deals but towards the end of the year the numbers skyrocketed. These numbers are now reaching, with a lag of several months, the mortgage market and that's what we are seeing now. Of course the situation influences prices and pushes them up, and it's reasonable to assume we will see price rises this year."
The mortgage taking figures are also being boosted by people with state entitlements recycling their mortgages in the program launched several months ago by the Ministry of Construction and Housing. This is bringing new money to the banks. However, banking sources stress that these are not dramatically high numbers - in March NIS 600 million was recycled out of a possible NIS 17 billion.
The banking sources said, "There is no great response to the government program despite the attractive offer. The more sophisticated public probably already implemented the recycling, while many others remain indifferent."
Senior executives in the banking system believe that what will influence the real estate and mortgage market in the coming months is the plans of Minister of Finance elect Moshe Kahlon. He is expected to raise taxes on real estate purchases by investors.
A senior banking source said, "Publication of such plans is likely to cause investors to rush into the real estate market in the short term to beat any possible restrictions."
"Investors will be dragged into the market and this could create a frenzy and additional upward pressure on prices with no real solution for lowering them. Playing with demand creates no genuine solution. The solution is on the supply side. A long term strategic solution with targets must be presented to restore public faith in government control, and only when they see things moving, for example the planning committees working faster, and supply growing, then the market will calm down. Dealing with the demand side with major media headlines only harms the situation."
Published by Globes [online], Israel business news - www.globes-online.com - on April 26, 2015
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