Deutsche Bank has blamed low interest rates on the Israeli housing bubble. The bank insists that mortgages are the main growth driver in the housing market and that interest rates have driven prices higher, not supply constraints.Other sources not connected to the bank
Deutsche Bank said, "Our analysis shows that the decline in mortgage rates to all-time lows of 2.4% (vs. 5.5% average prior to 2008) has been the main factor driving housing prices higher rather than lack of supply. Prices started to rally in mid-2008 exactly at the time that interest rates declined and prime rate floating mortgages increased in popularity.
Bank of Israel Governor Prof. Stanley Fischer cut interest rates to an historical low as a result of the global economic crisis and credit crunch in the final quarter of 2008. Harverd observed, "Not by coincidence, this was the starting point for the rally in apartment prices."
Deutsche Bank reported that since the start of 2009 the median apartment price has risen 28% to NIS 979,000 or $252,000.
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