Calcalist, Dotan Levy, 23.09.2021
After the Central Bureau of Statistics' housing price index pointed to a 1.3% rise in prices last July, similar to the rate of increase last April (and a record rate not seen here since April 2016), the Bank of Israel reported a historic record in mortgage rates at 11.85 billion earlier this week. NIS in August, compared to only NIS 6.7 billion just a year ago (August 2020). In the last three months, Israelis have taken out NIS 35 billion in mortgages, which puts the shadow of the mortgage record set in 2020 as a whole - NIS 78 billion.
As expected, the generous and convenient financing of loans for the purchase of an apartment in a zero interest rate environment raises the demand and the prices of the apartments. Also according to the ability to purchase an apartment in Israel of the Alrov Institute for Real Estate Research at the Koller Faculty of Management at Tel Aviv University, in collaboration with Calcalist - in the second quarter of 2021, due to rising apartment prices and many employees returning to the labor market, it was more difficult to buy here Apartment.
The monthly repayment index, affected by interest rates and housing prices, rose by 0.28% to NIS 7,545, while the equity index, which is also affected by the income factor, jumped by 10.4% compared to the first quarter of 2021, reaching an average level of NIS 841,000.
To understand the change in indices one must first examine what happened to the variables that affect them. The first quarter of the year was mainly affected by the regulatory change initiated by the Bank of Israel towards the end of 2020, and entered into force on January 17, 2021. As part of the change, the Bank of Israel lifted the limit on prime interest rates. The limitation on the variable interest rate, which determines its share of the mortgage at a rate of up to two-thirds, remains the same. In light of this, in the previous quarter there was a significant relief for the buyers of the apartments, which was violated in the current quarter. The variable interest rate in the second quarter recorded a negligible decrease of 0.01%, and the fixed interest rate increased by 0.07%. Accordingly, the average interest rate rose during the second quarter by 0.02 basis points compared with the previous quarter.
At the same time, house prices in the 12 cities examined in the index recorded an average increase of 0.2% during the second quarter of 2021 compared to the first quarter of 2021. Compared to the corresponding quarter last year, these are significant price increases, which averaged 4.3%. Along with these increases, the wages of employees in the economy decreased on average during the second quarter of 2021 compared to the previous quarter by 5.5%.
The volatility in the average wage began from the first quarter of 2020 and stems from a massive outflow to the IDF during the corona period and the return of some of the workers later in the period. Since most of those who went to the IDF were mainly from the lower deciles (and since the CBS only checks the wages of the workers, not including those in the IDF), during the corona period there was an increase in the average wage.
So now that many of the workers are back in the job market one can actually detect a decrease in average household income compared to the corresponding quarter last year. On the other hand, the interest rate, which is the most influential on the ability to purchase an apartment, is in a place from which it will be difficult for it to continue to fall, so it is estimated that henceforth any adverse change in other variables will immediately translate into an deterioration in apartment buyers.
The study was conducted by Prof. Danny Ben Shachar, head of the Alrov Institute of Real Estate Research and a researcher at the Koller Faculty of Management at Tel Aviv University, and Yoav Tuvia, a research fellow at the institute. According to Ben Shahar, the situation in the real estate industry does not indicate optimism at this stage: "Expectations from the price per occupant have run out, there are more projects, but these are only projects that remain in the pipeline. In the years that the program was in operation, we saw a certain improvement in the ability to purchase an apartment, but it did not return to the level we were at before the price increases that began in 2007. That is, price per occupant did not solve the problem, neither in terms of the required equity nor in terms of mortgage repayments. With the current expectations of price increases and the fact that interest rates have nowhere to go today, I am not very optimistic. " 1.53% on average in the second quarter. Add to that a third of a fixed interest rate, and the average interest rate is around 2.11%. There is currently no possibility of a significant interest rate cut. If prices continue to rise, this is expected to be reflected in the decline in housing accessibility in Israel. "