Contractors Urge Further Rate Cuts After Bank of Israel Decision

Following the Bank of Israel's decision to lower its benchmark interest rate by a quarter percentage point, major contractors have responded, with some expressing that the move, while positive, is insufficient. They had anticipated the rate would remain unchanged and had already criticized the central bank's policy. Several contractors noted that the cumulative effect of five rate cuts since the end of last year has saved them millions of shekels, and in some cases, tens of millions.

While acknowledging the slowdown in the housing market, some contractors believe the rate cuts will eventually lead to price increases, countering the central bank governor's call for developers to lower prices to attract buyers. In contrast, financial market professionals maintain that the high number of unsold apartments will continue to drive prices down by a few percentage points by year-end. The key question remains whether the ongoing rate reductions or the surplus of unsold homes will ultimately dictate market trends.

Eli Avissarur, CEO of Avissarur Moshe & Sons and acting president of the Israel Builders Association, stated that while a single quarter-point cut is minor, the third consecutive reduction signifies a significant shift in financing costs. He emphasized the public's need for certainty that the interest rate trend has changed long-term. Avissarur believes continued cuts will encourage more families to reconsider delayed purchases and ease the heavy financing burdens on the construction sector. He praised the governor's decision as brave, given global trends, and sees it as a boost for economic growth and housing demand, though he anticipates further cuts are needed for strong momentum.

Avishai Ben Haim, CEO of Rotstein, echoed this sentiment, stating that the rate cut lowers financing costs for both developers and buyers, providing a much-needed boost to the housing market, which has shown signs of recovery in recent months. Avi Zeitouni, CEO of Zeitouni Group, agreed the cut is correct but argued that the Bank of Israel is moving too slowly, suggesting a larger cut of at least half a percent was warranted given current inflation and economic indicators. He believes the current 3.25% rate still burdens households, businesses, and investments, particularly in real estate, and that a deeper cut would have provided a more significant economic push.

Tomer Reifman, CEO of Yaaz Entrepreneurship and Construction, highlighted the positive momentum from five rate cuts within a year, crediting the Bank of Israel for responsibly supporting the economy. He sees the reduction in financing costs as a major benefit for apartment buyers, especially in high-demand areas, and as an incentive for developers to accelerate construction. Real estate appraiser Ohad Danos suggested that the next rate cut could be a turning point for buyers, especially after the upcoming elections, predicting a rapid market shift. Lawyer Hagai Adoram pointed out that the Bank of Israel's own data shows a stable inventory of unsold apartments and a moderate increase in transactions, contradicting claims of a market collapse.