Last year, the real estate market experienced one of the biggest upheavals in its history. In April 2022, the Bank of Israel raised the interest rate several times, which jumped from a quarter of a percent to 4.75% at its peak. The sharp increase in interest rates led to a decrease in demand and the taking of mortgages.
At the beginning of 2023, with the unveiling of the main points of the bills that led to huge protests against the changes in the judicial system, the real estate market reacted with further declines in demand. With the outbreak of war last October, the industry entered a standstill and brought potential apartment buyers to sit on the fence and wait for the end of the war.
Recently, the Central Bureau of Statistics published the annual real estate survey, which indicated a decrease of approximately 34% in the sale of apartments in 2023. The last quarter of 2023 was of course the lowest in terms of purchases. For example, in October 2023, with the outbreak of the war, Only about 930 apartments, a decrease of about 60% compared to September and of about 53% compared to October 2022.
Unsurprisingly, the volume of demand for mortgages also decreased following all of this.
The uncertainty that has become a second name in the real estate market in the last year, brings with it many concerns and the avoidance of buying an apartment, whether for investment or for living. But perhaps the uncertainty and stagnation are an opening to opportunities these days?
It seems that since the beginning of the war, apartment buyers have an upper hand – the contractors offer apartments with significant discounts and benefits, among other things by subsidizing interest rates. Some banks also grant loans and mortgages under favorable conditions.
In addition to this, the Bank of Israel took several actions to bring about the recovery of the economy and help in dealing with the economic challenges during the war. In early January, the governor of the Bank of Israel lowered the interest rate for the first time in two years by a quarter of a percent.
Also, the supervisor of banks removed the limit on receiving loans for any purpose with a financing rate exceeding 50% until March 2024. So is the period of stagnation really a golden opportunity to purchase an apartment on good terms?
Since the establishment of the state, Israel has experienced some crises, disasters and wars, and in most cases it has managed to recover from them and even grow rapidly.
There is an estimate that interest rates are expected to continue to decrease during 2024. Even a certain decrease may encourage potential buyers to get off the fence and complete transactions.
Another factor that can affect demand and apartment prices is the Jewish Agency’s expectation of waves of Jewish communities worldwide immigrating to Israel, among other things due to growing expressions of anti-Semitism.
The slowdown in the number of construction starts will result in a low supply of new apartments in the long term, which may once again lead to a wave of price increases in the post-war period. Buyers who were debating before the war whether to ‘get off the fence’ and buy an apartment, fear today that after the fighting, activity in the economy will soar and with it the demand for housing. The fear is that the high demand will meet a low inventory of ready-made apartments, and the result will be an increase in real estate prices.
