Michael Rochwerger, Yael Drel, The marker, 27.01.2020
Housing prices in Israel have risen by tens of percent in the last decade, but despite warnings from the Bank of Israel, credit rating companies and other factors in the dangers inherent in this trend, the residential real estate market continues to demonstrate stability and generate good profits for its active players.
The Bank of Israel released its public mortgage data in December 2019, data indicating the boil in the field. According to sources in the banking system and the real estate industry, 2020 is also expected to be a strong year in the mortgage market.
The figures show that during 2019 the public took mortgages totaling NIS 67.6 billion, an increase of about 14% compared to 2018, a figure that broke the record from 2015, which was NIS 65 billion.
The main reason for the increase in thevolume of mortgages is due to the maturation of quite a few projects in a cost-per-dwelling plan, in which apartments were discounted for an eligible population (young couples and homeless). This was especially evident in mortgages that were raised at high financing rates of 60% -75%, the weight of which was higher for all mortgages.
In December, 10,215 home purchase loans were taken - a record number since August 2015. In total, NIS 7.16 billion in mortgages were granted in December 2019 - an increase of 26.7% compared to November, and an increase of 23% compared to December 2018.
17% of all transactions
The cost of living plan has been the main factor in the strong performance of the mortgage market over the past year. The Bank of Israel data shows that in March-December 2019, the purchase price of dwellings for the dwelling was 17% of all dwellings for the same period, and the financial volume of mortgages given to purchase dwellings for the dwelling during that period reached NIS 7 billion - about 12% of the total mortgages given. At that time.
The cost to the resident was the flagship project of Finance Minister Moshe Kahlon, but he recently announced that he would retire from political life upon the establishment of the next government, so that it remains to be seen what the fate of the plan will be.
More than suitors
Investors' mortgages in December also saw the presence of investors - with 1,434 loans granted for the purchase of an investment apartment. The total amount of loans for investment home buyers in December was NIS 901 million - the highest since December 2014.
Despite a 20% increase in mortgages to purchase investment apartments compared to 2018, it is still too early to determine whether investors have returned to full strength in the mortgage market.
In a recent interview with TheMarker's annual real estate supplement, Tal Bar-El, head of Bank Leumi Mortgage, addressed investors in the housing market: "It should be understood that investors' attendance has dropped dramatically, but they have not disappeared completely. They do buy apartments, but sell a lot more, ”he said.
"In the world of low interest rates, if the apartment can generate an annual yield of 5% - 6% in the periphery and 3% - 4% in the center is not bad at all, and if the value of the apartment increases by 10% - 20% later, so you can make an exit - So it's even better. If investors consider that there are no more interesting alternatives - they will return to real estate, "Bar-El added.
The Bank of Israel also notes the decline in interest rates on the new loans, a decrease recorded in all interest rates and linkage sectors, but the spreads against government bonds are still at least 1.5%.
Alongside the fall in interest rates, the figures indicate an increase in the volume and rate of mortgage refinancing. Thus, in 2019, the volume of recycles was NIS 9.1 billion (about 12% of total performance), compared with about NIS 5.8 billion in 2018 (about 9% of total performance that year).
Banks are celebrating
The main beneficiaries of the boom in the real estate and mortgage markets are, of course, the banks, which in recent years have shifted the weight of their mortgage lending operations. After solving the capital problems they faced, all banks are now strong in the mortgage market, and according to the banking system, competition between banks This is clearly felt in this segment, while the rest of the financial bodies - institutional, credit card companies and non-banking bodies - are hardly noticeable in mortgage activity.
All banks enjoy high mortgage margins, low expenses for credit losses in this segment and high demand - mainly thanks to a cost-per-plan plan.
The aggregate portfolio of the five major banks - Hapoalim, Leumi, Mizrahi Tefahot, Discount and International - grew by 7.7% in the first nine months of 2019, compared with the corresponding period last year, to NIS 367 billion. The sharpest growth during this period (13.3%) was presented by Discount, whose portfolio totaled NIS 36 billion at the end of September.
The increase in activity translates into more than 10% growth in revenues, and the banks 'aggregate net income from mortgage operations was NIS 1.32 billion, an increase of 19% over the same period in 2018 - and was approximately 15% of the banks' aggregate net income.
In February, the banks are expected to publish their financial reports for 2019, presenting a cumulative profit from their mortgage activity, which will reach record levels of NIS 1.8-2 billion.