Most Israeli Home Buyers Who Canceled Deals Didn't Buy New Homes
A significant number of apartment purchase cancellations in Tel Aviv, particularly in 2024, are being attributed to "failure to meet a suspensive condition," often related to delays in obtaining building permits. Galit Ben-Naim, deputy chief economist at the Ministry of Finance, has released new data analyzing these cancellations and buyer behavior post-cancellation.
This trend in Tel Aviv contrasts with the southern region, where economic reasons accounted for two-thirds of cancellations, with only 12% due to unmet suspensive conditions. In Tel Aviv, the primary question is whether buyers genuinely waited for permits or used this clause as an exit strategy without penalty. The data reveals that only 28% of those who canceled deals in Tel Aviv subsequently purchased another apartment, indicating that the majority did not re-enter the market.
Ben-Naim also highlighted the administrative burden of processing these cancellations, citing an example where a buyer was told to "be patient" due to a backlog of previous requests. The increasing rate of cancellations may shed light on a broader discrepancy in the housing market: while building permits and construction starts are rising, apartment sales by developers have significantly declined since their 2021 peak.
Ben-Naim suggests a connection, noting that deals signed "on paper" before construction begins could be canceled without buyer compensation if developers fail to meet contractual suspensive conditions. This means even a closed sale might not result in an actual purchase. This phenomenon could explain the "catch-22" in the real estate market, where rising permit numbers don't align with falling sales.
The data is visualized in a chart showing increasing building permits but a slower pace of new apartment sales, widening the gap between the two. Ben-Naim emphasizes that permit data includes urban renewal projects and that the trend lines are more important than the numerical difference. This widening gap is also reflected in the sharp increase in unsold new apartments over the past four years.
