"Rents will rise sharply soon. A large part of our prediction of an interest hike originates in the renewed jump in the housing item (rent). In the past year, housing prices have been rising, in view of the shortage and extremely low interest rate. The restrictions imposed by the Bank of Israel have failed to cool the market," says Excellence Investments Ltd. It predicts that rising housing prices will boost rent, as they move in tandem.
"The Bank of Israel will raise the interest rate before the US, to 1.75% within 12 months," predicts Excellence. "In the past two weeks, the capital market has concluded that the chances of another interest rate cut have sharply fallen. Local indicators published in the past two week, which show stable domestic growth and higher inflation, do not correlate with Israel's low interest rate. Higher yields overseas could support a weakening of the shekel and exogenously solve the exchange rate problem. It should also be noted that the Israeli real estate market continues to heat up, which supports an interest rate hike to cool it slightly."
Excellence raised its 12-month inflation forecast to 2.3% above the midpoint of the government's 1-3% inflation target. It predicts that the Consumer Price Index (CPI) will rise by 0.5% in August and by 0.1% in September, partly because of a seasonal rise in rents and prices for fruits and vegetables, recreation and holidays, and the jump in the price of gasoline, due to the higher price of oil.
Published by Globes [online], Israel business news - www.globes-online.com - on September 1, 2013
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