Mortgage Activity Rises as Loan Amounts Increase, Not Transaction Volume

Activity in Israel's mortgage market is expanding, but the primary driver is a significant increase in the average loan amount rather than a surge in the number of transactions. According to a review by the Association of Mortgage Advisors for August, mortgage loans for housing reached approximately NIS 79.6 billion since the start of the year, a 14% increase compared to the same period last year. In August alone, NIS 10.9 billion in housing mortgages were taken out, a 6% decrease from July. Including other loans, total mortgage performance reached about NIS 84.2 billion year-to-date.

The average mortgage amount has climbed across all purchase types. For a replacement dwelling, the average rose from NIS 1.29 million to NIS 1.42 million. For investment properties, it increased from NIS 1.17 million to NIS 1.37 million, and for a first home, from NIS 1.05 million to NIS 1.15 million. Even second-hand home buyers and self-builders saw their average loan size grow from NIS 1.14 million to NIS 1.26 million.

While overall real estate transactions saw a slight year-to-date increase of 3% by July, with new apartment sales up 9% largely due to discounted units, the market for existing homes remained stable. Investor purchases increased by 11% year-to-date, compared to a 6% rise for single-home buyers and an 8% decrease for those upgrading. Despite this, investors sold more properties than they bought, leading to a reduction in their overall housing stock.

Meanwhile, the supply of new homes remains substantial, with around 217,000 apartments under construction in the first half of the year. Although the average construction time has slightly decreased, it remains high. Apartment prices show a mixed short-term trend, with a 0.2% rise in June but a 1.2% annual decrease. The central region saw the sharpest decline at 3.2%, while the north and Jerusalem experienced increases. The gap in the price of an additional room between the periphery and the center has doubled since 2017.

Interest rates saw a slight increase in August, with the weighted average mortgage rate rising to 4.38% from 4.34%. The projected interest rate also climbed, and the proportion of prime-rate loans in mortgage mixes increased. However, some easing signs were noted, including a decrease in loans exceeding 60% financing and a reduction in monthly repayments exceeding 30% of income. Delinquency rates also continued to fall.