2014 was another strong year for the mortgage market. New mortgages totaled over NIS 50 billion, close to the peak year of 2013. The banks' aggregate mortgage portfolio totaled NIS 262 billion, after doubling its size in seven years.
Neither the 0% VAT plan, nor Bank of Israel restrictions, nor the escalation in the security situation could lower the demand in the mortgage market. Furthermore, 2015 is slated to also start with strong positive sentiment, following the elimination of the 0% VAT plan, which released a bottleneck and brought quite a few fence sitters waiting for that benefit back into the market.
Combined with the strong demand, however, the mortgage portfolio's composition underwent more than a few changes over the past year, following the introduction of restrictions imposed by the Bank of Israel. These restrictions are ostensibly not affecting the market, since demand continues to be high. A more thorough examination of the market data, however, shows an effect: the level of risk in the new mortgages is lower. Whether this will be enough for doomsday, when the real estate market trend reverses, is unclear, and Supervisor of Banks David Zaken is still anxious about the risk in this market. The following are the key numbers in the mortgage market, based on Bank of Israel data for January-November 2014. Whether the data show a worrisome bubble or reduced risk is an open question.
31.3% is the proportion of mortgages granted for the purchase of housing priced at over NIS 2 million. While mortgages for expensive properties fell slightly in 2013, this proportion rose again in 2014, crossing the 30% barrier.
For the sake of comparison, the proportion of mortgages for expensive properties was 29% in 2012 and 28.8% in 2013, seemingly indicating stabilization in the luxury housing segment, which then rose substantially in 2014.
On the other hand, housing priced at less than NIS 1 million is vanishing. While 12.5% of mortgages were granted on properties priced at NIS 800,000 or less in 2012, the proportion of such mortgages was only 9.2%, while the proportion in the NIS 1.2-2 million bracket was 39.5%, the same as in 2013.
It appears that the upward creep in prices is continuing. While 68.2% of mortgages were granted for housing priced at over NIS 1.2 million in 2013, this segment accounted for 70.8% of mortgages in 2014. It can be assumed that had the 0% VAT plan not cast its shadow last year, the increase might have been even greater.
NIS 601,000 is the average mortgage amount in 2014. The average mortgage climbed above the NIS 600,000 plateau. The average mortgage in 2012 was NIS 575,000, meaning that the average increased 5% in two years. This characteristic also reflects the rise in real estate prices, since the average mortgaged rose, even though the rate of financing in on a downtrend.
52.5% is the average proportion of financing in housing purchases in 2014, meaning that mortgages paid for just over half of the purchase, with the rest coming from the buyer's own resources. This continues the downtrend over the two preceding years; the corresponding proportions in 2012 and 2013 were 56.1% and 53.8%, respectively.
Published by Globes [online], Israel business news - www.globes-online.com - on January 4, 2015
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