Real Estate Developer Slams Bank of Israel Governor Over Interest Rate Decision

The Bank of Israel's decision to maintain the interest rate at 3.25% has drawn criticism from the real estate sector. While most developers and economists anticipated the rate would remain unchanged due to the interest rate gap with the US, real estate professionals argue the decision negatively impacts the market. Governor Amir Yaron stated that construction activity remains high, though he acknowledged a slight decrease in new construction starts compared to the previous year. He also noted that building permits and completions are at high levels, exceeding the strategic housing plan's target of 65,000 completed apartments annually. Yaron added that while the volume of apartment transactions has stabilized after a May-June increase, apartment prices have fallen by 0.6% in July-August and 1.8% annually. He emphasized the importance of maintaining a high supply of housing.

Real estate developer David Azulai criticized Governor Yaron, accusing him of operating according to a "political calendar." Azulai argued that after five interest rate cuts totaling 1.25% this year, the governor should have considered further reductions, especially given consumer price index data. He questioned whether the Bank of Israel is giving undue weight to political considerations and proximity to elections instead of focusing on economic data and the needs of the economy. Azulai expressed a sentiment that the governor is being overly cautious, resembling "election economics," and that the real estate market is struggling to recover, with high interest rates burdening buyers and developers. He believes a continued wait makes it difficult to restore confidence in the market and that decisions should be based on long-term economic outlooks rather than caution that could harm the economy.

Amit Gottlieb, Vice President of the Association of Contractors and Builders in Israel, echoed these concerns, stating that leaving the interest rate unchanged hinders the construction sector's recovery and burdens both buyers and developers with high financing costs. He argued that the housing crisis cannot be solved by deterring buyers while future supply is impacted. Gottlieb called on the government to remove barriers and accelerate construction, warning of a future housing shortage and renewed price pressures if these measures are not taken. He also urged the Bank of Israel to resume interest rate reductions when economic conditions permit.