Israel's Housing Market Sees Sharp Decline in Free Market Sales
Translated & summarized from Bizportal by baba
Israel's housing market experienced a significant slump in July, particularly in the free market, with overall transactions down 4% year-over-year. Subsidized housing sales surged, while the southern city of Be'er Sheva faces a severe inventory and sales crisis. Developers are increasingly relying on financing incentives to boost sales.
The story in 5 lines · by baba
- Free market housing sales dropped significantly in July, reaching multi-year lows.
- Government-subsidized housing sales saw a substantial increase.
- Be'er Sheva faces a severe housing market downturn with rising inventory.
- Developers are using financing incentives to circumvent price reductions.
- Upcoming regulatory changes may impact future sales strategies.
July saw a significant downturn in Israel's free housing market, with a 4% drop in overall transactions compared to the previous year, totaling 7,692 units. When excluding government-subsidized sales, the number falls to 6,582, a 9% decrease year-over-year and a 13% drop from June. The Ministry of Finance's chief economist department described this level as one of the lowest since the early 2000s, with free market transactions only 18% higher than in July 2002, despite a 60% population increase.
Sales of existing homes also declined by 11% year-over-year to 4,724 units. New home sales by developers were mixed: while overall sales increased by 9% to 2,968 units, this rise was solely driven by subsidized housing. The free market for new homes saw a 5% decrease, with only 1,858 units sold, and a sharp 22% drop from June.
Conversely, government-subsidized housing programs experienced a surge, with 1,110 units purchased in July, a 46% increase. This marks the third consecutive month with over a thousand subsidized deals, totaling 6,231 units from January to July, a 19% rise. This highlights the substantial impact of programs like "Price for Tenant" and "Discounted Apartment."
The southern city of Be'er Sheva is facing a particularly severe downturn, with 311 apartments sold in July, an 18% decrease. Year-to-date sales in the region are down 25%, the steepest decline in Israel. The city itself has seen a 74% drop in new apartment sales over two years, with approximately 1,100 new apartments currently unsold, a 15% increase year-over-year. At the current sales pace, it would take 38 months to sell this inventory, compared to 12 months two years ago.
Developers are increasingly using financing incentives, such as deferred payments and subsidized interest, to avoid official price reductions. In July, 27% of free market developer sales in key areas included financing benefits, an increase from previous months. The Ministry of Finance warns that official data may underestimate these benefits, as some deals offering waived indexation are not classified as financing promotions. The upcoming expiration of a Bank of Israel directive limiting such incentives is expected to significantly impact future sales strategies.
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