BOI directives make large mortgages more expensive

The Bank of Israel has left the interest rate for November unchanged at 2%, as expected. Governor of the Bank of Israel Prof. Stanley Fischer had raised the rate for October by 25 basis points to 2%.

However, in a surprise and dramatic move Supervisor of Banks Rony Hizkiyahu has made large mortgages significantly more expensive by publishing new draft directives regarding floating-interest leveraged housing loans. The Bank of Israel said, "The directives entail a requirement for a higher capital provision for floating-interest loans granted with a high loan-to-value (LTV) ratio. The directives will not apply to small housing loans (below NIS 800,000) or loans to those with housing entitlements."

One senior banker told "Globes," "This is a significant toughening of mortage conditions and it means at least one percent more in annual interest. The measure is clearly aimed at hurting purchasing groups. The Bank of Israel is determined to cool down Israel's housing market. According to the Central Bureau of Statistics, the price of an average Israeli home has risen by 20% over the past year and 50% since mid-2007.

The Bank of Israel added, "The new directives require banking corporations to increase their capital provision for floating-interest-rate housing loans granted from October 26, 2010, in which the loan represents more than 60 percent of the value of the property, and the ratio between the floating interest rate part of the loan and the total sum of the loan equals or exceeds 25%. Loans fitting into this category on which the capital requirements were weighted at 35% or 75% respectively, will be weighted at 100% from this date."

Source Globes

Morgan Stanley sees no Real Estate bubble in Israel

Morgan Stanley sees no real estate bubble in Israel in a general review on the economy, published after a visit to the country, in which analysts met senior Ministry of Finance, Bank of Israel, and other officials.

Morgan Stanley analyst Tevfik Aksoy does not believe that the housing issue will come to resemble the problems in other countries in the past couple of years for several reasons. There exists new macro-prudential measures imposed on banks that were introduced early last summer intending to slow down loan growth. The loan-to-value ratio (around 60-70%) remains quite low and rules out speculative investments in the real estate market to a large degree. The Bank of Israel is in the process of tightening rates, which will make loans more costly and discourage borrowing.

House prices are too high as it is and, given the fact that average wages have not been keeping up pace at all, this suggests that further upside might be limited. Aksoy says that supply should begin to improve and ease pressure on home prices. "Looking forward, we expect the ongoing rise in building permits (to double in 2010) and the pick-up in housing starts to gradually improve the picture in the real estate market. "However, until then the BoI might be facing policy challenges and, given the inherent nature of the construction business, which goes through serious delays, the matter is likely to remain on the agenda for some time. On the positive side, the low investment in the residential housing sector presents a gap to be filled, which might provide further upside to growth in the years ahead."

Aksoy points out that interest rate hikes by the Bank of Israel will strengthen the shekel, which the central bank is trying to avoid. Morgan Stanley predicts that Israel will achieve 4% GDP growth in 2010, 3.8% growth in 2011, and 3.5% growth in 2012. It also believes that the government will have no problem in meeting its budget deficit targets of 3% of GDP in 2011 and 2% in 2012.

Source Globes

Aviv Rothschild Center, a new luxury office project

Work has now started on Aviv Rothschild Center, 22 Rothschild Boulevard at the corner of Nahalat Binyamin Street.

Aviv Rothschild Center sets new standards in office buildings. "Recently we saw a new trend developing with the building of luxury residential apartments. That trend has now extended to office buildings because of an increase in demand for luxury offices as well" said Daphne Harlev, CEO of Aviv Group. The complex is made of two buildings, the new business tower and "Baker House" that was designed by legendary architect Yehuda Leib Magidovich -- the first city engineer of Tel Aviv. The Barker will be renovated and connected to the tower thanks to a modern glass atrium. Architects leading the project are Moshe Tzur Amnon Bar Or.

The tower will offer between 30 floors in addition to seven underground parking levels and will extend over an area of 22,500 sqm. Construction is scheduled to last three years and rent per square meter in the tower is expected to stand at about NIS 130-150 on average. Aviv Group has also applied for permission to build a hotel after receiving permission from the Tel Aviv Planning and Building Commission to increase the number of floors to 29.

Aviv group founded by the late Moshe Aviv, is one of the oldest and largest construction companies in Israel, and has extensive experience managing complex engineering projects for residential and commercial purposes, in Israel and abroad. The company recently completed the construction of the new Assuta Hospital, the largest and most advanced private hospital in Israel. Since its inception in 1963, is has been involved in many Israeli landmarks like the Aviv Gimel project in Ramat Aviv, the Weizman Center in Tel Aviv, the Weizmann Institute particle accelerator, the seawater desalination facility at Palmahim beach, the Diamond Exchange complex in Ramat Gan and many others.

More pictures of the construction are available there.

Henry Taic to open Israel's first Kempinski hotel

Henry Taic plans to build the first Kempinski Hotel in Israel as part of the David Promenade Residences under construction on Tel Aviv's seafront.

Taic's company, Nahal Group, signed an agreement with Kempinski Hotels AG last week to establish a luxury hotel on half the eight-dunam (two-acre) lot owned by Nahal on Herbert Samuel Street in Tel Aviv near the US Embassy. The Kempinski Tel Aviv Hotel will have 220 rooms, including 50 suites, on 23 floors. It is due to open in 2013.

The Kempinski Tel Aviv Hotel will be attached by glass cube to the 25-storey David Promenade Residences, which will have 60-70 luxury apartments ranging in size from 100 square meters to 1,000-square meter duplexes. Residents will have use of the hotel's facilities. Nahal owns the David Intercontinental Hotel in Tel Aviv, the Meridien Dead Sea Hotel, and Grand Court Hotel Jerusalem. Kempinski Hotels was founded in 1897. The luxury European chain how has 60 hotels worldwide, with 43 more planned for Europe and Asia.

Source Globes

Israel unlikely champ in real estate

Israel, despite perennial fears of war, has emerged as one of the hottest — and least likely — property markets in the world: since real estate collapsed around the globe in 2008, at least one industry watchdog lists it as the fastest-rising property market on earth.

But with global economic meltdown — and the sub-prime mortgage fiasco that precipitated it — still fresh in people's minds, officials are stepping up efforts to rein in its overheated property sector. The fear is that a property bubble could shake confidence in an economy that withstood the worst of the world's financial crisis. In the span of months, the central bank has raised interest rates several times and the government is rallying to build new units in this land-strapped country. "The housing market has set off enough crises, and we're not going to let that happen in Israel," Bank of Israel Governor Stanley Fischer said earlier this month in announcing his sixth rate hike in just over a year.

According to Global Property Guide, a trade magazine that monitors the housing market, Israeli housing prices in the second quarter of 2010 rose sixth-fastest in a ranking of 36 countries. Four of the top five, including Singapore and Latvia, were rebounding from sharp price drops. So looking at the past two years ended in June — the last period for which there is data — Israeli real estate clocks in at No. 1.

For Israel, where high-tech and science are booming businesses, the property price spike is the latest claim to fame. But it's one officials aren't boasting about, given ample evidence of how an imploding bubble can shatter decades of economic growth. Examples of the danger of an overheated market litter the globe. From Dubai to Detroit, housing prices plummeted amid the global meltdown beginning in 2008. Defaults on mortgages surged in the United States while in Dubai, the one-time Arab boomtown, property prices tumbled by about 50 percent in 2009. Amid that downturn, Israel stood firm, shielded in part by the fact that its property price gains were late in coming. While many countries were on a property high during the middle part of the decade, its market was largely stagnant.

Its banks offered nothing close to the US-style subprime mortgages, and Israel's financial market is not intertwined with the mortgage market — the main reason for the US housing meltdown. Down payment requirements remained high, often equal to more than 40 percent of a house's value. Adding to the mix was a conservative local banking sector whose broader dislocation from the global market helped to shield Israel from the worst of the global meltdown. What fueled the boom, however, were rock bottom interest rates and a relatively low supply of housing. The result was a nearly 30 percent jump in property prices since September 2008.

For Israelis, those gains are hard to swallow. After extensive house hunting, Ami Kaufman and his wife stopped looking at the "good" neighborhoods of Tel Aviv: At $600,000 for an unrenovated, three-bedroom measuring about 1,000 square feet (100 meters), it's simply out of reach. Instead, the couple are looking at a working-class area in the hope it will gentrify like other down-and-out Tel Aviv neighborhoods did. They're hoping to find something within the year, before they're pummeled by rising mortgage prices on top of rising housing prices. "The problem ... is demand versus supply," Kaufman said. "Too many people want apartments. Nothing is going to stop these rises." Housing supply, says Vered Dar, chief economist at the Psagot-Ofek investment house in Tel Aviv, was "thrown out of whack" by the mass immigration of some one million immigrants from the Soviet Union 20 years ago. Housing starts surged excessively in the ensuing years, leaving contractors and the government struggling to find a balance.

Over the past five to six years, "they didn't build enough," she said, adding that housing was not something that could be imported to balance supply and demand. "It takes time," she said. But it's time that Israelis, increasingly, can't afford. Today, a three-bedroom apartment in Tel Aviv, with its beaches, balmy weather and freewheeling spirit, fetched an average NIS 2.15 million, or $560,000, in June, compared with NIS 1.73 million a year earlier, according to government statistics. The price of an average apartment in Jerusalem, with its holy sites and mixture of ancient and new, rose 19 percent to NIS 1.55 million, or $403,000, at the end of June from NIS 1.31 million a year earlier. The prices seem out of sync with the average income in a country where the per capita GDP of some $30,000 is around the OECD average, but taxes are very high.

Parents, once able to buy their children apartments outright or give big chunks of down payments, are no longer able to do so. Even professionals are struggling to come up with the cash for housing. As a result, many find themselves simply unable to buy or are compromising on their dream houses. The central bank's efforts to rein in prices with interest rate hikes have provoked government resistance, with the Finance Ministry worried that Fischer's rate hikes could hurt the economy by strengthening the shekel against world currencies and battering the vital export-oriented high-tech industry. But officials have also not sat idle. The country's skyline is dotted with apartment towers and cranes, and a recent reform in the government-run Israel Lands Administration is designed to free up more land for construction.

Even before that reform was enacted, housing starts were up more than 20 percent in the second quarter of 2010 from the first three months of the year. Finance Minister Yuval Steinitz, however, told a business conference on Tuesday that it would take up to two years to solve the supply-side problem. Dar, the economist, has long disputed assessments that Israel was experiencing a housing bubble. She describes it as "more babble than bubble" because the recent boom follows roughly a decade of stagnant prices in inflation-adjusted terms. If prices continue to rise at the current pace, however, "it will start to bubble," she said, while predicting that price rises would taper off as supply increases and interest rates climb. There are signs that might already be happening: Shekel-denominated prices in the second quarter of the year inched down 1 percent from the first quarter.

Source Jerusalem Post

Pedestrian bridge to ease access to the beach

The Tel Aviv municipality will construct a new pedestrian and bicycle bridge over the Ayalon Highway, linking the Montefiore neighborhood on the western side with the developing business area in the Bitzaron neighborhood on the eastern one. The municipality said the bridge is set to become a key link in a planned green route, allowing residents of the city's eastern neighborhood to reach the beach in a 10 to 15 minute bicycle ride. The bridge is being planned by Chen Architects, together with Rokach Ashkenazi Engineers. It will be 100 meters long, 12 meters wide and divided into two tracks - an asphalt bicycle track and a wooden pedestrian walk. Separating the two would be a sitting area with specially designed street furniture. Its width would allow for at least one coffee kiosk, and it will have transparent acoustic walls on either side, protecting passersby from the noise of the highway underneath.

"The goal is to make the bridge into a place where people meet and mingle," said architect Nili Zamir-Chen. "The plan focuses on the human perspective and creates an inviting place for human interaction." Zamir-Chen also suggest that a coffee shop be set up at the western end of the bridge to mark the point where the noise of the Ayalon highway gives way to the quiet of Montefiore. The pedestrian bridge is but one of several planned to span the highway dividing the city. Tel Aviv intends to build a roof over the stretch near the Central Train Station, allowing for the construction of a new business center directly above the highway. A wide bridge is also planned near Nachalat Yitzhak, to link Emek Bracha Street with Shaul Hamelekh Avenue and the new business towers planned to the north of the Kirya government compound.

"Our idea is to reinforce the connection between the city's east and west, just like we did between the north and south," says city architect Yoav David. "We insisted the bridge would be for pedestrians and cyclists only. In the future, you'll be able to cross the bridge from Bitzron to Montefiore, continue through the south Kirya business area, Givon hill and the Cinematheque, climb up to the new Habima square, roll down Zion Boulevard and Bugrashov, and get to the sea. This kind of accessibility doesn't exist today and it's important for us to promote it." Despite the municipality's optimism, few if any sections of this route can be comfortably traversed on bicycle, or even on foot. The city architect said a planning review of Bougrahsov Street will begin soon. In the meanwhile, planning meetings in the municipality and the Ayalon highway company have already begun, and the new bridge is expected to be completed within two years.

Source Haaretz

New home sales jump

Israelis snapped up new homes during August. Demand for new homes jumped 13% in August compared with July, while sales of new homes soared 38% to the record levels that were last seen in May, the Central Bureau of Statistics reported today.

Demand for new homes amounted to 3,310 apartments in August compared with 2,920 apartments in July, the figure was highest demand since May. Sales of new homes were also the highest since May, with 2,102 new homes sold in August compared with 1,515 new homes in July. Longer term figures also pointed to higher demand.

Demand for new homes rose 1% between January and August 2010 compared with the corresponding period of 2009, although demand was down 2% compared with May-December 2009. Despite promises by Minister of Housing and Construction Ariel Atias to flood the market, the inventory of new houses continued to shrink in August. The inventory fell 2.2% to 9,370 apartments, the lowest number for many years. New homes inventory was 10,023 at the beginning of the year.

However, it should be stressed that new housing building starts has risen, but the current inventory is only enough for 7 months. In the center of the country sales of new homes rose 68% in August compared with July. New home sales rose 27% in Tel Aviv in August and 33% in the south.

Source Globes

Fisher warns us of a real estate bubble

Several days ahead of an International Monetary Fund (IMF) meeting in Washington, Governor of the Bank of Israel Prof. Stanley Fischer spoke to reporters about Israel's economy in particular, and his views on the global economy in general.

Fischer opened, "The Israeli economy is in a good situation. But we are in a global economy that is in a very complicated situation, so we must avoid complacency. The situation here is good because the economy grew at 4.6% in the second quarter, the rate of unemployment fell almost to the level before the crisis (6.3%), inflation is in the middle of the target (1.8%), but there is a quick rise in housing prices, which is a main component in the CPI. Apartment prices are rising very quickly." Fischer estimated that the government's budget deficit will be 4% this year, "and even a bit less", and he added that the figures are positive, "especially when you take into account the situation in the global market."

Last week, the Bank of Israel raised its 2010 growth forecast to 4.1%, based on surprisingly strong second quarter GDP figures, though it cut its 2011 forecast to 3.8% from 4.%, on lower forecast growth in the West, and in the US in particular. Regarding the lower growth forecast, Fischer said, "It’s a small difference. There is a lot of uncertainty about the global economy, and everyone needs to take it into account. We haven't completely passed the crisis; the environment does not compare to what there was 3-4 years ago. Growth is very, very moderate in the US, and growth forecasts are very low. Growth in Europe is expected to be slow, and so we cannot say that the situation for us will definitely continue to be as good as it is today." The Governor hinted that if housing prices continue to rise, he will continue the interest rate hikes he has implemented in recent months.

Answering a reporter's question, Fischer said, "There is a slowdown in the pace of the rise of housing prices, but if there is no change on the supply side it's a problem. It must be noted that there is a rise in housing starts but if it does not continue we will need to take other steps. There are enough crises that began in the housing market, and we will not let it happen in Israel."

Source Globes

Fancy a penthouse in Tel Aviv?

Penthouse sales have reached new levels in the last few years in Tel Aviv. Last year, for example, the penthouse in the Sea One project was sold for NIS 110 million. Even more recently, Eyal Ofer bought the top flat at Ofer Tower, also on Herbert Samuel Street, for a cool NIS 115 million.

If you fancy a penthouse too, here is a sample of what's available on the market...

NIS 33 million - USD 9 million

Location: Koifman Street

Floor: 4

Flat Size: 800 sqm

Terrace Size: 120 sqm

Landscape panoramic sea view

Maintenance: NIS 8,000 / month

The apartment's ceiling is about six feet tall, has no external walls and is surrounded by a glass wall overlooking the sea. The apartment is on one level and includes, private indoor pool, sauna and Jacuzzi. Penthouse is owned by a foreign resident who bought the apartment a few years ago and uses it as his holiday apartment. He recently bought another apartment, no less prestigious, and has therefore put this one on the market.

NIS 25 million - USD 7 million

Location: Dubnov Street

Floor: 7

Flat Size: 460 sqm

Terrace Size: 130 sqm

View: 360 degrees of full cityscape

Maintenance: NIS 300 / month

The apartment is located in the city center, but in a quiet area and close to cultural and entertainment centers. It has seven bedrooms, four bathrooms and a shower, high ceilings (3.40 meters), central vacuum and heating-floor. Apartment building has three parking spaces. 

NIS 5.5 million - USD 1.5 million

Location: Alexander Argov Street 

Floor: 2-3

Flat Size: 170 sqm

Terrace Size: 80 sqm

Landscape: a neighborhood park

Maintenance: NIS 2,200 /month

The apartment is a duplex penthouse renovated last year invested at a cost of one million shekels. It includes four bedrooms, high quality flooring, with a mosaic ceiling in the bathroom and has a living room window which provides light all day long. The apartment building  includes an Olympic pool, a jacuzzi, a sauna, a steam room and 24 hour a day maintenance. 

NIS 11 million - USD 3 million

Location: Hamelits Street

Floor: Fifth sixth floors

Flat Size: 250 sqm

Terrace Size: 70 sqm on the top floor

View: 360 degrees

Maintenance: NIS 550 / month

The apartment is in a new building next to Meir Garden in Tel Aviv. The penthouse was designed and built for a couple, so it includes only two bedrooms. All accommodation services are located on the first floor, the second floor includes two rooms, a kitchenette, a bathroom and a 360 degree balcony. The flat has two parking spaces and an private lift. The design was done by an architect specializing in the design galleries, and includes a mosaic bath, a raised black parquet in the bedroom, parquet floors, windows and closets throughout the apartment with Chinese designs in all baths. 

NIS 7.5 million - USD 2 million

Location: HaGanim Street in Ramat Hasharon

Floor: 16

Flat Size: 200 sqm

Terrace Size: 100 sqm

Landscape cityscape of Tel Aviv, Petah Tikva, Ramat Gan, Netanya Sea

Maintenance: NIS 500 / month

The apartment is the highest in the region, as all the buildings in the neighborhood are up to ten stories only. The penthouse is on one level, it has high ceilings and a design made of bright shades of metallic purple mosaic. There is is a huge 50 sqm bedroom, two additional bedrooms and a study. Building has two covered parking spaces.

NIS 9.6 million - USD 2.6 million 

Location: Isrotel in Hayarkon Street 

Floor: 22

Flat Size: 194 sqm

 Terrace Size: 50 sqm

Landscape panoramic sea view, from Jaffa to Herzliya

Maintenance fees: about NIS 2,400 a month

The apartment was designed so that it includes only one bedroom with a balcony area of 10 sqm, the rest of the apartment being the living room and kitchen. The building includes a gym, a swimming pool and a convention hall lobby. The adjacent penthouse is also for sale so you can purchase both flats for a total of 316 sqm and USD 3.4 million.  

NIS 100 million - USD 27 million

Location: Corner Nehardea  & Barry 

Floor: 30-31

Flat Size: 1,000 sqm

Terrace Size : 80 sqm

View: State Square, Central Tel Aviv to the sea

Maintenance: NIS 14,000 / month 

Almost impossible to find an apartment this size in town. The penthouse was built on two floors and was designed by architect Moshe Tzur. The building is the heart of Tel Aviv and includes a swimming pool, gym, a residents club and 24 hours security.

NIS 76 million - USD 21 million

Location: Yitzhak Elhanan Street - White City Residence

Floor: 40

Flat Size: 578 sqm

Terrace Size: 115 sqm

Landscape: panoramic sea view

Maintenance: NIS 8,000 / month

The project is currently under construction. The apartment is on one level and located in the picturesque neighborhood of Neve Tzedek, about 300 meters from the beach. The apartment design is done by the Italian designer Giorgio Armani. It includes a Jacuzzi for ten people on the roof overlooking the sea.

NIS 3.6 million - USD 1 million

Location: Montefiore Street 

Floor: 4-5

Flat Size: 100 sqm

Terrace Size: 15 sqm on the lower level, 55 sqm on the top floor

Scenery: Sea

Maintenance: about NIS 450 / month

The project is currently under construction. A boutique located in the heart of the historic fabric of the White City, minutes away from the cultural center, recreation and shopping. This duplex penthouse has four rooms on the lower floor and a spacious suite on the top floor. Granite porcelain flooring, electric roller shutters equip the flat. Included in the price is an underground parking.

NIS 39 million

Location: Herbert Samuel Street - Sea One Project

Floor: 20

Flat Size: 300 sqm

Terrace Size: 30 sqm

Landscape: the sea and along the promenade - Jaffa, Tel Aviv Marina

Maintenance: NIS 4,400 / month

The project is currently under construction. The apartment includes three bedrooms, each room with a sea view. Apart from panoramic views, high ceilings are planned at a height of six meters. The residential building will also house a hotel, but with a clear separation of the two - a separate parking, separate elevators and separate entrance lobby. However, tenants will benefit from services of a five-star hotel.

Source The Marker