Governor of the Bank of Israel Prof. Stanley Fischer is not concerned about the influence of price rises in the economy on inflation, and does not believe a real estate bubble has formed or that the euro block will break up. In a special interview with "Globes" for Rosh Hashana, the Jewish New Year he reiterated the possibility that the Bank of Israel might restrict mortgages but is in no rush to take steps. He insists that the main problem in Israel's real estate market is supply.
New mortgages being taken are breaking records each month and the real estate market is again at boiling point. Are you concerned?
Fischer said, "In Israel there is a need to build more apartments. We don't want to kill of the market and therefore we are trying to reach a balance between prices and the level of activities and so far this has been alright but if prices are rising too quickly, then we need to deal with this."
What things should be done?
The limitations on mortgages have already influenced the market, I have no doubt. In the past 12 months, apartment prices have risen by a little over 1%, and that's more or less stable. Now there is a change and we must see what to do."
There are those who say the Bank of Israel does not want to see apartment prices falling out of concern for the stability of the banking system.
It would not be healthy if there was a fall in housing prices that was too fast but we do want to see moderate falls and we do hope to reach such a situation…. But it's too extreme to say that there is a bubble here. In the past 12 months we have seen stability. The idea of a bubble sounds great in the media but does not help us understand the situation."
Fischer also spoke about the tension regarding Iran and claims that it is causing investor to distance themselves from investing in the Israeli economy. "Uncertainty causes a fall in the willingness of investors to invest in the Israeli economy, especially Israeli investors. I thought that the uncertainty was small until the past few days but now I'm not so sure."
Published by Globes [online], Israel business news - www.globes-online.com - on September 16, 2012
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