Real Estate Deal Cancellations Surge 41% in Israel Amid Buyer Payment Struggles

The number of canceled real estate transactions in Israel has surged by 41% since the start of the year, according to data from the Chief Economist Department of the Ministry of Finance released by Mako. In January, 1,294 purchase deals were canceled, rising to 1,821 by August. The cancellation rate has increased from just 0.5% in 2021 to approximately 3.6% currently.

This rise is linked to financing schemes offered by developers in recent years, where buyers paid only 10% to 20% of the apartment price upfront and deferred the remainder until delivery. Many buyers assumed property prices would continue to rise, allowing them to sell their rights for a profit before completing full payment. However, prices have not consistently increased, financing costs have risen, and some buyers are struggling to meet their commitments.

Ohed Danus, former chairman of the Israel Appraisers Association, explained that some buyers hoped to "turn over" their equity but now prefer to cancel the deal and pay the agreed compensation, typically around 15% of the apartment price. The Finance Ministry warns this is only the beginning of the trend. Galit Ben Naim, Deputy Chief Economist, noted that only about 40% of apartments purchased in the last three years have reached delivery, so most buyers have yet to prove full financing capability.

The main concern is that this wave of cancellations will impact developers' cash flow, as they rely on buyer payments to service bank loans. Despite Bank of Israel restrictions on deferred payment schemes, such transactions still represent a significant portion of developer sales.