Quite recently, a month in which mortgages worth NIS 5 billion were taken had been considered unusual, but at present, this seems to have become the market standard. According to estimates in the banking system, August will close with new mortgages totaling over NIS 5.5 billion, with some banks estimating that this sum may even approach NIS 6 billion.
The average mortgage volume taken in the last 12 months totaled NIS 5.1 billion, making these estimates for August 8% higher than the average. "August is traditionally considered a strong month, among other things because people use the vacation to move to a new apartment. But if you neutralize this effect, it is important to remember that the market is strong and this is not going to change. I estimate that in the next few months the data will show high mortgage volumes and that 2016 will close with new mortgages worth over NIS 60 billion," estimated a senior source in the mortgage market.
The banks say that the latest directive of Minister of Finance Moshe Kahlon to tax apartment owners with over three properties will not cool the market. "Following this directive, we have noticed an increasing trend in which investors register the apartments in their children's name, and therefore avoid purchase tax, betterment tax during the sale and the new tax," the banks say.
Entire projects registered in the children's name
"There are entire projects in high-demand areas registered in the children's name. This is evident because the property owner has a low income, while his parents are also listed as borrowers," a source in the banking system says.
Moreover, the banks say that the level of demand is still high and continues rising , mainly due to the activity of several sectors, including investors from abroad, who move to Israel due to the antisemitism in many countries. There is also increased demand in the haredi (ultra-Orthodox) and Arab sectors, as well as demand resulting from natural population growth.
Despite the high demand, not all banks are eager to expand their exposure to the mortgage sector. According to financial statements recently published by the banks, the trend in the first quarter continued in the second quarter - a slowdown in operations for large banks and an increase for medium banks. For example, Bank Leumi (TASE: LUMI) decreased the number of new mortgages by 40%, to NIS 6.8 billion, compared with NIS 11.8 billion in the corresponding quarter. Bank Hapoalim (TASE: POLI) concluded the first half of 2016 with mortgages worth NIS 6.1 billion. The large banks have reduced their mortgage operations due to the high capital demands imposed by Bank of Israel (which are higher for large banks than for the rest of the bank).
Nevertheless, Mizrahi Tefahot Bank (TASE:MZTF), which is also the largest player in the market, continued increasing its market share, at the expense of the large banks. In the first half of 2016, it provided mortgages worth NIS 12.6 billion, the same as Leumi and Hapoalim combined. Israel Discount Bank (TASE: DSCT) also started to beef-up its operations. In the first half of the year, it provided mortgages worth NIS 3.3 billion, compared with only NIS 2 billion in the corresponding half.
Published by Globes [online], Israel business news - www.globes-online.com - on August 24, 2016
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