Israeli Real Estate Market Not Uniform, Demand Set to Surge

Liat Shuv, head of the business division at Bank Leumi, stated at the Israel Real Estate Conference in Tel Aviv that recent price drops in the housing market are primarily concentrated in the Tel Aviv area, while prices in other parts of Israel continue to rise. She emphasized that Israel's growing population fuels significant demand for apartments, despite a current market slowdown.

Shuv explained that the perception of widespread price decreases is misleading, as the data shows most declines are in central Israel and Tel Aviv, and even there, they are not substantial. She asserted that Israel does not have a single real estate market but rather multiple distinct markets with varying demands based on location and population needs. The current market slowdown, she noted, is due to a combination of recent uncertainty, security concerns, and high interest rates, which have caused potential buyers to adopt a wait-and-see approach.

However, Shuv anticipates a surge in demand as interest rate hikes appear to be concluding and uncertainty dissipates. She observed increased activity in sales offices and growing buyer interest, characterizing the current environment as a "buyer's market" with more options and seller flexibility. She predicts that this pent-up demand will eventually translate into a new market equilibrium.

Regarding construction, Shuv highlighted the growth of urban renewal projects nationwide, with significant expansion in Jerusalem, Haifa, and the south. This trend, she believes, is rebalancing the market by shifting investment and demand away from Tel Aviv and towards other cities, thereby strengthening the periphery and promoting more balanced growth.

Addressing the reported surplus of approximately 80,000 unsold new housing units, Shuv clarified that this figure represents a small percentage of overall active construction. She attributed the accumulation of unsold inventory to a temporary mismatch between the peak of construction and the recent low point in demand, suggesting that demand is poised to rebound.