The massive real-estate price increases experienced in Israel over the last several years have elicited in policymakers the realization that they need to take action to reduce housing demand and prevent the Israeli housing market from collapsing. As a result, during May and October 2010, the Bank of Israel stepped in and increased the effective rate on mortgages and lowered the number of qualified applicants. In announcing the new regulations, the Bank of Israel’s main objective was to halt rising demand and to prevent further growth of the housing bubble.We use event study analysis to show that not only did the new regulations have no effect on housing prices but they in fact also markedly influenced the market value of the real-estate companies traded on the Tel-Aviv stock exchange.
- Event study
- Real estate