“The moment after the security threat is removed, we will see a surge in security,” Uri Yonessi, head of the mortgage department at Bank Leumi, told Globes news editor Bar Lavi, during the “Northern Talk” conference held by Globes and Bank Leumi in Acre. The North is supported by large requests from foreign residents, and we will see more open immigration files and great interest in the real estate market.” He added: “Before immigrating, people make sure they have a place to go, and the first deal they do is a real estate deal, and we are seeing a boom across the country, with an emphasis on the ocean.”
Housing prices will continue to rise not only because of these demands, but because Israel is suffering from a shortage of 130,000 apartments, Younesi stressed. “This is a gap that has been created over 15 years or more, and there is excess demand that will not be filled in a year or two,” he added. This was also his response to Lavi’s question about rising housing prices, with the average mortgage exceeding NIS 1 million, at a time when northern Israel has been evacuated and is experiencing uncertainty.
“There were expectations that home prices would fall in a year with very high interest rates, but that did not happen,” Yonesi said. “People realized that interest rates were not going to fall significantly, so we started to see buyers returning to the market. There is a lot of demand and deals, and as a result, The housing price index increased by 4.4%, despite the situation in both the north and the south.”
“Prosperity in the South, uncertainty in the North”
“There is a boom in the south at the moment: investors are coming, people are coming because they realize that the threat in the south is about to go away. On the other hand, in the north we see uncertainty, we still see a lively activity here, contrary to what we expected, but it cannot be compared to the trend in the south. There are a lot of displaced people who are pushing up rents in the center, but they realize that people will come back to live here, so today they are stockpiling apartments, understanding that the new apartments will not be ready in a few months but in a year or two, and they are cheap compared to the center of the country,” continued Younesi.
We have recently seen government bond yields rise. Does this affect mortgage holders?
“Mortgage borrowers have suffered over the past two years from their mortgage payments. This started as a result of the outbreak of the war in Ukraine, which created an inflationary process in the world and in Israel. Here the trend was more modest, meaning that economists had to raise interest rates less sharply, in a way that affected the interest rate on cash and bonds, and we have another measure in the cost of risk as a result of the fact that the country is in a very high security situation. The rating of a number of companies for the State of Israel has been lowered, and this is part of the phenomenon due to the rise in interest rates, the banks’ profits have fallen significantly, and there is great competition. So it is not certain that mortgage borrowers have been harmed, and perhaps the opposite.”
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“The market is more competitive”
You talk about competition in the mortgage market, but the State Comptroller criticized the behavior of consumers who go to the bank, get an offer and sign without comparing prices. Is this still an issue?
“Of course not. The mortgage market is one of the most competitive in Israel, and there are 3,000 mortgage consultants who examine the mix, not just the price. The bank that knows how to match the right deal to the client is the bank that offers the right solution. A mortgage is the largest financial transaction for families in the long term, and you should take it seriously, not just according to the price but according to its structure. Today there are at least five paths, and according to research, every client today checks between two or three banks before getting a mortgage.”
The promotions offered by the contractors include selling new apartments with payment terms of 20% upon signing the purchase contract and 80% upon occupying the project. But Yonesi does not agree with the assumption that they are changing or distorting the situation in the real estate market. “It is a common practice to tell a client, who is essentially buying a larger house, to come and give the ownership rights and then pay the rest with a mortgage. In the past six months, many contractors, in order to avoid large financing costs, wanted to advance the clients’ payments to them, and they agreed to a process in which financial discounts are provided by supporting part of the mortgage interest. That is, the contractors are willing to support it until the apartment is occupied, and this is a practice that has been used here for many years, and everything is done responsibly. When the bank considers such a deal, it looks at it in the long term, so that the client entering into the deal also knows how it will be completed.”
Full disclosure: The conference was held in conjunction with Bank Leumi.
Published by Globes, Israel Business News – en.globes.co.il – on June 26, 2024.
© Copyright Globes Publisher Itonut (1983) Ltd., 2024.