At some point, prices can't keep going up, and it seems that soon there'll be a dramatic drop in housing prices in Israel.
Roni Mizrahi, Chair of the Mizrahi Group and President of the Chamber of Contractors, spoke with Anat Davidov and commented on the effects of a possible recent slump in the volume of real estate transactions. He also harshly criticized Amir Yaron, the Governor of the Bank of Israel.
On June 11, it was announced that a two-decade low was recorded in the number of real estate transactions throughout Israel. Roni Mizrahi spoke with Anat Davidov on her program to assess if this indicates that we're facing a drop in prices.
Mizrahi noted that there's really a very serious slowdown marked by about a 50% decrease in the number of transactions. Demand for apartments still exists and Mizrahi said that people still want to buy apartments, but the soaring interest rates make it difficult for many people. He noted that the most affected areas are luxury projects in Tel Aviv.
The market is going crazy
He added that prices can't continue to rise, the market is going crazy and we've entered a situation where money is out of fashion. It's now known that contractors paid for lots about 50-80% above the government appraiser's price.
Yet, he clarified that for every negative there's also something positive, as there has been a 50% increase in the amount of mortgages people are taking out. People bought fewer apartments but took out more mortgages.
Mizrahi also criticized Amir Yaron, saying he's the first culprit in this difficult situation since he should have raised the interest rate but not to such a high percentage, and kept a little weapon close to his chest.
Israel is almost at a point where one can compare interest rate hikes to a snowball rolling down a mountain at a very high speed. Yet, Israel's economy is among the ten best in the entire world.
At the end of his remarks, Mizrahi referred to the situation of Israeli contractors vis a vis the mindset in the housing industry and emphasized that he estimates that between 500 and 1000 contractors will go bankrupt this year.
Around 8-10% of active contractors will leave the workforce, and then they'll be a shortage of apartments. In June 2024 housing prices will increase again. Construction and Housing Minister Yitzhak Goldknopf and his CEO Yehuda Morgenstern don't understand that the entire economy is headed toward a catastrophic situation.