Impending economic growth and the Prime Rate

Two days ago, the governor of the Bank of Israel decided to leave the interest rates unchanged for July. Was this wise? Will this last.

Take a look at these headlines:

Elbit to supply aircraft systems…..
Shekel-Dollar rate rises….
Employment Services sees drop in jobseeker numbers…
Bank Hapoalim raises record amount….
Israel to be opened to foreign funds….
Goldman Sachs raises Teva target price….
Barclays Capital raises banking sector rating….
Tadir Gan shares jump on GM order…..

The casual reader would think that I scraped these headlines off of a three year old Israeli business paper. I actually took them from today's Globes, a quality newspaper that I highly recommend.

What does this mean for you and your mortgage? Everything. We understand that there are business cycles, and plan mortgages accordingly. Had we seen any single headline like these listed, it could be a blip. All of these headlines together in one day is a sign that the economy has ebbed. We will prepare our clients.

Every case is different, and you should always consult your qualified Israeli Mortgage Expert.

Israeli banks held up better than expected

I saw this piece today in Globes . All of us in this industry have been very fortunate.
The banks have done well.
There were no more foreclosures than the typical minuscule number.
Real estate prices have continued to increase.

This entire recession was over blown, more a recession by need of the media than actual businesses. Unlike some other places where the valuations were dictated by speculation, in Israel the increasing real estate values are the result of supply and demand. The banks have continued to make loans as always, even though they are slightly more cautious than a few years ago.

In Israel, it is relatively easy to get a mortgage. You need to be very careful about which mortgage you take, which is how I make my living. However, most people can get

Every case is different, and you should always consult your qualified Israeli Mortgage Expert.

Interest rate set to rise

I saw this today on Globes
It looks like the Citi experts have finally picked up on what I've been saying.
Inflation is up, and despite the negative numbers at the begining of the year, we are on track to have an average inflation year, more or less. Citi sees interest rate hikes. I agree.

Every case is different, and you should always consult your qualified Israeli Mortgage Expert.

Israel--one of the few places in the world with rising real estate prices

As we have been postulating for some time, real estate prices in Israel have risen continuously.
The news is that we are one of the few places in the world where this has happened.

The official data has been posted on the Global Property Guide, a site dedicated to helping foreigners understand international real estate markets. They gather information from our Central Bureau of Statistics and similar institutions in 50 other countries and compares statistics such as purchase prices and rental rates.

You won't be seeing any thing like these signs any time soon in Israel.

As the situation in the world got worse, more and more people decided to buy in Israel. For years I have been writing about the lack of sufficient new home construction to cover our natural growth. In addition, we have seen a continued increase in Aliya and Jews buying a second home in the Land.

Inflation is determined by international trends. Real estate prices are determined by local supply and demand. There is still a tremendous opportunity available to invest in undervalued properties in attractive locations. Israeli mortgages can help foreigners purchase properties under very reasonable conditions.

Every case is different, and you should always consult your qualified Israeli Mortgage Expert.

The golden days are ending soon

The days of incredible mortgages are ending very quickly.

Most mortgages are not tied to the official interest rate, but to the banks' internal cost of raising capital.

Long term interest rates are the first quiet indicator of what is happening in the market. Right now, non-indexed mortgages are getting expensive rapidly. Watch the banks encourage people into inflation-indexed programs.

If you were thinking of refinancing, it must be done now. Soon it will be a money-losing prospect for most people.

Every case is different, and you should always consult your qualified Israeli Mortgage Expert.

Someone forgot to tell them that the recession is over

Sometimes I read the business news and I wonder if these guys understand what they're talking about. Take this gem from Kalkalist for instance. Is the job of the reporter really to regurgitate what some government official says?

So here's the news that you won't get from them. The recession is over, or at least it has hit its lowest point. This brief little recession wouldn't even have registered on the history of business cycles if it weren't for ridiculous government programs, mainly in the USA, propping it up. "Saving jobs" and "saving industries" is just government lingo for more programs and government controls that will only hurt everyone in the long-run.

Here are some facts:

• Inflation is back. Most of you probably missed this, so here you go:
  הלשכה המרכזית לסטטיסטיקה - כלכלת ישראל - מדדי מחירים In April we had 1% inflation. In March, we had 0.5%. In a recession you have deflation, not inflation.

Official inflation figures for the last 15 months, courtesy of the Central Bureau of Statistics

• I don't how this one made it by the geniuses of Globes, but real estate prices in Israel continue to rise. In recessions, prices are supposed to fall, not rise.
• If you follow the US financial papers, you'll see that they're reporting daily on how "unemployment is not as bad as expected", how the banks are showing earnings, how financial institutions are trying to return government money.

These are all signs of a healthy economy, not a pending disaster. The entire recession was caused by governments.

For us this means that we need to take into account that the days of cheap credit are limited.

Every case is different, and you should always consult your qualified Israeli Mortgage Expert.

They finally found a way to lower Tel Aviv Real Estate Values!

I came across this jewel today on Globes.




The CEO of Nitevei Ayalon, the company who builds and runs the eponymous highway, thinks that we need to have congestion charges in Tel Aviv.



From reading the article, it appears to me that this guy really means tolls, but says congestion charge because he thinks that it's the sexy buzz word in international urban planning. [A congestion charge is a daily fee charged for entering a geographic area, whereas a toll is a charge for accessing a particular venue such as a bridge or highway.]



Starting in London about five years ago, congestion charges have lit the world of corrupt local politicians aflame. They finally found a way to milk the only productive people left in the country even more. The irony is that they brought down the values of real estate in both the areas within the congestion charge and the immediately bordering areas, while increasing the values of real estate for outlying areas.





If you want an academic explanation of why this happens, look here. If you want a simple intuitive version, here it is: people will try to avoid paying a congestion charge. People will frequent your business less and will be more disinclined to visit you if you live in this area. Do you want to live in an area will no one will visit? Neither does anyone else, and it becomes increasingly harder to sell properties, forcing down the valuations. In the immediately outlying areas, people don't want to risk going into the congestion zones by accident, and therefore want to move further away.

Think about it this way: if you lived in Ramat Gan and wanted to go to a furniture store, would you pay 30 shekels just to go into Tel Aviv, or would you go to Petah Tikva for nothing? The greatest irony of congestion charges is that they decrease the property values, and therefore municipal tax revenues from the same areas.

In any case, follow this closely. If they actually go through with it, look for values in Tel Aviv to fall and rise in Ramat Hasharon and Rishon at the same time. You heard it here first.

Every case is different, and you should always consult your qualified Israeli Mortgage Expert.