Altshuler Shaham Credit CEO Details Challenges in Israeli Real Estate Financing Amid Market Slowdown
Gili Topaz, co-CEO of Altshuler Shaham Credit, the credit arm of the Israeli investment house, described a slowdown in real estate sales and contract cancellations causing developers to complete projects without sufficient funds to finalize bank financing. This situation, uncommon a few years ago, has led many projects to end with 30%-40% unsold apartments. Developers now approach Altshuler Shaham Credit offering finished apartments with occupancy permits as collateral to secure credit, which they use to repay bank loans and fund new projects.
Topaz explained that previously, such financing deals were rare because developers did not need them. Today, both weaker developers struggling to obtain funding and larger, more established developers seek these solutions. Some financially stable developers also buy rights from smaller developers, with Altshuler Shaham Credit participating as a financing partner. The company’s credit portfolio totals around 500 million shekels, with 62% in construction and real estate.
Topaz noted that the real estate market has seen selective price declines since October 2023, with some areas like Jerusalem faring better than others. He rejected scenarios of a steep 20% price collapse, estimating only minor percentage drops. The rise of "speculators," aggressive investors aiming for short-term profits rather than long-term yields, has contributed to cancellations. These speculators, estimated at about 10%-15% of the market, are expected to cancel purchases to cut losses.
Contrary to common belief, Topaz said cancellations are unlikely among young couples or those upgrading homes, who generally need the property and are less prone to cancel. Instead, cancellations mainly come from speculators who never intended to keep the apartments. He emphasized that the market is not collapsing but undergoing a cycle with moderate price adjustments.
Topaz highlighted the impact of national sentiment on the economy and real estate, noting that uncertainty about future price trends influences buyer behavior. Despite challenges, he stressed that the market is stabilizing rather than crashing, with price drops limited to a few percentage points rather than large-scale declines.
