The Israeli Real Estate Market Plummets as Apartment Sales Drop 27%

Introduction

The number of apartment purchases in July dropped sharply when compared to the same month last year, as rising mortgage rates kept buyers’ pocketbooks closed, sending the market plummeting to the lowest levels in decades.

Sharp Decline in Apartment Sales

• Just 6,912 units were sold in July, a fall of 27% from July 2022.
• This figure itself was a 28% drop from July 2021.
• Transactions fell 3% from June to July, indicating a nearly stagnant housing market.
• July’s total barely topped the lowest-ever level for July, recorded in 2002 during the Second Palestinian Intifada.

Decrease in New and Second-Hand Purchases

Both new homes and second-hand purchases were down, according to the Ministry of Finance.

Concerns in the Real Estate Market

“This low is particularly noticeable in second-hand apartments, although in the market segment of the new apartments sold on the free market” there was also a deterioration, the report said.

Government Intervention Needed

Raul Sargo, president of the Boni Ha’aretz Contractors Association, urged the Israeli government to increase the supply of apartments by providing incentives to contractors and entrepreneurs.

Impact on Second Homes

• Purchases of second homes fell 41% year-over-year.
• Only 1,026 investment apartments were bought in July, down from 1,800.
• This figure represented a 9% slide from June this year.

First-Time Homebuyers Buck the Trend

First-time homebuyers purchased 3,971 units, just 11% fewer than in July 2022 and 4% more than in June this year.

Market Fluctuations and the Role of Interest Rates

Apartment purchases fluctuate throughout the year and from one year to the next.

The real estate market in Israel had been steadily growing before the Bank of Israel began hiking interest rates last year to control inflation.

April 2023 recorded only 4,001 real estate transactions, down from around 9,000 in April 2022.

Conclusion

The sharp decline in apartment sales in July highlights the challenges faced by the Israeli real estate market.

Government intervention and incentives for contractors and entrepreneurs may help revive the market and increase the supply of apartments.