Rental prices in Israel are expected to rise as a result of the recent hike in interest rates and tighter Israel mortgage restrictions. ”In light of stricter conditions on the approval of mortgages, the rapid rise in housing prices, the recent interest rate hike, and the increase in the purchase of apartments for investment purposes over the past year, we are expecting a moderation in the surge of residential housing prices and a greater probability of a continued rise in the pace of rental prices in the coming months,” said Ayelet Nir, chief economist at IBI investment house.

At the end of July, the Bank of Israel raised interest rates for August by a quarter percentage point, for the first time in four months, from 1.5 percent to 1.75 percent as way to stem the surge in Israel real estate prices. Over the past year prices in the housing market have risen over 20 percent and the Bank of Israel warned recently that if they continue to rise at this pace a housing bubble will develop.


In view of this concern, the central bank’s Supervisor of Banks issued a directive to the banks in May, ordering them to carefully examine their housing credit portfolio and their policy in that field, and to make an extra loan-loss provision for housing loans in which the leverage rate exceeds 60 percent. In practice it means that banks are discouraged from agreeing to lend homebuyers more than 60 percent of the value of a property, when before the directive they would lend up to 70 percent of the apartment value, and sometimes even more.

Hence, banks are now likely to demand a down payment of 40 percent of the property price from homebuyers instead of 30 percent or even less before. The stricter conditions on mortgage approvals will make it more difficult for homebuyers to be able to take out a mortgage as home prices have continued to soar to levels which many potential buyers, in particular young couples, can not afford. As such, the Bank of Israel, is hoping that this measure will dampen the rise in the demand for housing, which was boosted by a low interest rate environment over the past year and bring down property prices.

The IBI showed that when comparing the development of Israel real estate prices against rental prices since the first half of 2007, it shows that housing prices have risen at a faster pace than rental prices. IBI investment house expects the Bank of Israel to carefully increase interest rates over the next year to 2 percent or 2.25 percent.

J Post (http://www.jpost.com/RealEstate/Article.aspx?id=184081)

Cities and areas in outlying places in Israel are continuing to attract the interest of home buyers as Israel real estate prices in traditional demand areas such as Jerusalem and Tel Aviv have been sky high and the supply of new homes has been narrowing.

Demand for the purchase of new homes in the southern region of the country surged by nearly 50 percent from the beginning of the year until the end of July compared with the same period last year. Another popular area of interest by home buyers was the Haifa region where demand for the purchase of new dwellings has risen by 21 percent in the first seven months of the year compared with the corresponding period of 2009. In the central region, quantity demanded of new dwellings sold grew by 3.5 percent in the reported period.

Against this, the least popular area for purchases of new homes was Judea and Samaria, where demand plunged by 67 percent in the January to July period compared with the same months last year. In the Jerusalem area, quantity demanded of new dwellings sold fell by 31 percent in the seven-month period from the same period a year earlier. In the northern region, demand for the purchase of new homes declined by 5.2 percent during the reported period, while in Tel Aviv demand dropped by 1.7 percent.

Popular cities for homebuyers include Petah Tikva where 391 new apartments were sold in the first three months of the year compared with 604 during the same three months last year. In Ashkelon, the number of sold apartments in the first three months of the year more than doubled to 299 this year compared with 142 during the same period a year earlier. During the first quarter of the year, 214 apartments were sold compared with 230 in the same quarter last year.

Property sales picked up in Yavne from the beginning of the year after no new apartments were sold in 2009 due to a backlog in new projects. From the beginning of the year, 172 new apartments were sold in Yavne compared with a mere 15 in 2008. In July, 26 new apartments were sold in the city compared with 15 in June.

Demand for the purchase of new apartments on a national level continued to grow and increased by 1 percent in the first seven months of the year compared with the same period in 2009, according to the survey published by Israel’s Central Bureau of Statistics and the Housing and Construction Ministry.

At the same time though, in the January to July period this year, the number of new home purchases fell by a mere 1 percent compared with the same period last year, while there was an increase of 3.6 percent in the number of new dwellings in construction not for sale. In July this year a total of 1,139 new apartments in private construction were sold compared with 1,200 in June and 1,808 in May.

However over a period of year the volume of new home sales increased. Between June 2008 and June 2009, the number of new home sales rose by a monthly average of 2.1 percent.

The survey also showed that the number of available new homes for sale is continuing to narrow. At the end of July, the number of new homes in private construction stood at 9,180, a decline of 5 percent compared with the end of July 2009. Out of the 9,180 new homes about 8,780 were still in active construction and the remainder 400 completed construction over the past 15 months. Out of the total number of new homes available for sale at the end of July, about 40 percent were located in the central region of the country, 24 percent in the Tel Aviv area, 14 percent in the Jerusalem area, 11 percent in the southern region, 7 percent in the Haifa area, and 3 percent in the northern region. Trend figures show that the supply of new homes in private construction for sale has been falling steadily over the past four years from a level of around 14,000 homes at the beginning of 2006 to just over 9,000 at the end of July 2010.

Jerusalem Post (http://http://www.jpost.com/RealEstate/Article.aspx?id=186340)

Not only you cannot afford to buy a house in Israel these days...you cant afford to live period....

exploiting the housing market is sometimes a crime :mad:

Indeed, I live in Jerusalem, and I guess for the same prize as they would ask for my an appartment same size in such an area in Amsterdam. Only there the wages earned might be twice as high. Freaking expensive it starts to be here, and I don't want to live in some settlement or Modi'in or something.

Prices are crazy in Modi'n and settlements also.

Where can a new family live in? Eilat? Kiryat Gat? Yavneh? :?

^^with their parents

One of the things that has surprised me enormously is the crazy Tel Aviv rental-market; ok, everything is expensive, I understand the huge demand there currently is but, isn't it a bit audacious to ask for 15000 NIS/month for a 100 m2 old and shabby unfurnished apartment in a builiding which is about to fall to pieces? Just because it has a balcony and it's located in a decent area of town...?

Yes it is very audacious. But as long as there are suckers who agree to pay such prices, the prices won't go down.

the crazy thing about paying 15000 a month for nothing is that if they can get say...4-5 months in the year to rent the place or agree to half, then they would still be laughing themselves to the bank..... there are people who don't mind renting for a few months and 15000 would go down to what? 5000 US so some people are willing to agree to that

I can't believe that there are even such places in Tel Aviv (crappy, 100m^2 apartments) that rent for 15,000 NIS a month. That's mindblowing.

I can't believe that there are even such places in Tel Aviv (crappy, 100m^2 apartments) that rent for 15,000 NIS a month. That's mindblowing.

its a buyers market. and like i mentioned, they know people arent going to pay 180,000 NIS a year....so they sublease it for those few suckers in the year...

If Tel Aviv wants to prosper they should enforce rental caps so that no one abuses other peoples right to live

It sounds like it is unsustainable. I don't know if it will crash or just drop down a bit, but if people can't afford to live somewhere, they will go somewhere else.

It sounds like it is unsustainable. I don't know if it will crash or just drop down a bit, but if people can't afford to live somewhere, they will go somewhere else.

That's the real point; the progressive " gentifrication" of the city and thus, the subsequent " expulsion" of young non-rich people.

And that would be a real shame, turning TLV into " something else" :ohno:

Here in the US, real estate prices continue to go down as the currency becomes worth less, for a variety of reasons. How has this affected Israel's economy, and specifically, it's real estate market?

Here in the US, real estate prices continue to go down as the currency becomes worth less, for a variety of reasons. How has this affected Israel's economy, and specifically, it's real estate market?

As for now, that does not seem to be the case here at all.

Market demand is still high and the NIS is holding strong.

rents are unreasonably high, period.
there should be some kind of rent control system put in place.

Sales of new homes in Tel Aviv plummeted 48% in December compared to November

http://english.themarker.com/treasury-says-ta-real-estate-market-finally-cooling-down-1.339428

now with the mortgages harder to take out because of the new BOI regulations, rental prices will rise even further