Israelis borrowed record NIS 116 billion in mortgage loans in 2021

Israelis borrowed record NIS 116 billion in mortgage loans in 2021
Written by Publishing Team

An overheated Israeli real estate market broke new records in 2021, as home buyers took out nearly NIS 116 billion ($37 billion) in home loans over the course of the year, according to preliminary data released by the Bank of Israel last week.

In 2020, Israelis received home loans totaling NIS 78.1 billion ($24.89 billion), and the 2021 figure represents a nearly 50% increase over the previous 12-month period.

December alone saw Israelis borrow 12.2 billion shekels ($3.89 billion) to finance mortgages, an 11.9% increase from November’s figures, and a 48% increase from December 2020. It was the second-highest number 2021 is August with a value of 11.9 billion shekels ($3.8). billion) in mortgage loans.

During the month of November, 18,200 housing units were purchased in Israel, the highest monthly number since June 2015, when more than 16,000 housing units were purchased, an increase of 62% compared to November 2020 , according to a separate report published this week by the Finance. Office of the Chief Economist in the Ministry.

Almost 40% of these units (about 6,700) were purchased by so-called investors – families who already own one or more dwellings – an increase of 200% compared to the same period last year, and 41% more than in October 2021, which was stated The report that investor activity also witnessed a record high.

It was the highest share of investor purchases since June 2015 when then-Finance Minister Moshe Kahlon raised the purchase tax from 5% to 8% in an effort to discourage households who already own a home from buying more and contribute to a rapid rise in home prices. At that time, 30% of the housing market was annually purchased as investment housing.

But the crisis — fueled by limited supply, historically low interest rates, and rising demand — continued to ferment.

In 2020, at the height of the pandemic, the purchase tax was lowered again to 5% in an effort to bring investors back into the real estate market, boost the construction sector, and increase tax revenue amid the economic slowdown caused by COVID.

The current government has reinstated the 8% purchase tax, a policy that took effect on November 28, 2021.

The Treasury report this week indicated that the slight increase in investor purchases in October (when plans were announced to restore the 8% purchase tax for second home buyers) and November was 5% higher than the previous two months in June 2015 when 8 entered % tax comes into effect.

In November, investors also sold 3,900 housing units, the highest number in a decade and an 88% increase from November 2020, according to the report. “It is safe to assume that the sharp increase in investor sales can be explained, at least in part, by [the desire] To take advantage of the opportunity of high demand from investors who want to enter the market before the purchase tax increase,” the report states.

Meanwhile, first-time buyers bought more than 6,100 housing units in November, the highest number in a single month over the past decade, according to the Finance Ministry.

Israelis’ record home purchase also comes amid record price hikes. Home prices jumped more than 10.6% in 2021, according to data released Friday by the Central Bureau of Statistics (CBS), which looked at prices in the October-November 2021 period compared to the same period last year.

The surge in prices last year represented the largest such increase since 2013, according to CBS. Prices in Jerusalem have increased by 12.3% in the past year. 10.5% in and around Haifa; 10.7% in Tel Aviv; 7.1% in the North and 9.9% in the South.

Governments have long promised to bring down home prices, which have been rising for more than a decade. Exorbitant costs have put home ownership out of the reach of many Israelis, weakening the middle class.

In October, the government unveiled a major housing plan for the period 2022-2025, which aims to rapidly increase the supply of apartments in the hope of lowering prices.

Finance Minister Avigdor Lieberman said the government hopes to narrow the gap between supply and demand over the next three or four years, but acknowledged that the issue of housing and the cost of living in Israel in general is “one of our biggest challenges.”

Economists and experts said these new government plans were a “drop in the sea” and did not address core issues such as rapid population growth, government-controlled supply, lack of infrastructure and rising inequality.

David Brammer contributed to this report.

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