Israeli banks have concluded a challenging year with record profits, yet the real estate sector, a key growth driver, is causing concern. Although bank stability is not at risk, exposure to problematic mortgage debts is rising. Approximately 52% of bank credit portfolios are directed towards real estate, indicating a high concentration risk. This focus diverts resources from productive investments to the real estate market, leading to increased housing prices and pressure on households. Banks, to prevent price drops, partner with real estate developers. However, rising interest rates might make renting more attractive. Future political scenarios could impact the market, with forecasts predicting a 30 to 50% price drop over the next five years. Non-bank credit companies, while profitable, could lead to losses for pension funds. The Israeli real estate market faces significant challenges, with major implications for the economy and households.
