According to data released by the Bank of Israel (BOI) this afternoon, the Israeli real estate market is continuing to contract. It shows that the overall value of mortgages obtained in November was NIS 7.6B, a 31% drop from the number of mortgages issued in the same month last year. Furthermore, the Tax Authority and the Finance Ministry published their data earlier in the day, reporting declines in the number of transactions and overall tax income collected for the month.
According to BOI’s data, the real estate market was able to absorb the first interest rate increases and maintained its upward trend. Despite an initial increase of 0.25% in April and 0.4% at the end of May, the number of mortgages taken out by the general public during this period was higher than in the same months in 2021.
However, things began to shift in July. The third 0.5% increase was made at the beginning of that month. This time around, the interest rate hike appears to have had an impact on the real estate market, as the volume of mortgages obtained in the months following that have been lower compared to corresponding months in 2021, with September being the exception due to a higher number of working days relative to the same period last year.
The reduction in mortgage applications in November of this year versus November of last year shows that the downturn that began in July of this year is accelerating.
Even though the current data does not disclose the categories of borrowers, i.e. whether the property purchased was for personal use or investment, and whether it was government subsidised, one thing is clear: there are fewer people who are ready to take out more expensive mortgages at this time. Therefore, the question everybody is asking is how long the market will hold its ground before housing prices begin to fall? This is something Israel hasn’t seen in a long time.