Israel's Housing Market Weakens, Developers Offer Incentives Amid Falling Sales

New apartment sales in Israel saw a 9% increase in July compared to the previous year, reaching 2,968 units. However, this overall rise was entirely driven by government-subsidized housing programs, which surged by 46% to 1,110 units sold. In contrast, sales in the free market, excluding subsidized units, fell by 5% to 1,858 units, marking a significant decline.

This trend is also evident in the year-to-date figures, with subsidized sales up 19% while free market transactions increased by only 1%. The broader housing market also experienced a downturn, with total free market transactions (new and resale) dropping 9% year-over-year in July to 6,582 units, one of the lowest July figures since the early 2000s. Resale apartment sales also declined by 11% to 4,724 units, with a particularly sharp 36% drop in Tel Aviv.

The weakness is especially pronounced in southern Israel. In the Beersheba area, free market new apartment sales decreased by 18% year-over-year in July, and by 25% since the start of the year. Beersheba itself saw a 74% drop in free market sales over two years, with unsold inventory now representing about 38 months of sales.

In response to the slowdown, developers are increasingly offering financing incentives. In July, 27% of free market sales involved such incentives, an increase from previous months, though still lower than last year. The Central region saw the highest rate of financing incentives at 39% of free market sales.

Subsidized purchases have consistently exceeded 1,000 units for three consecutive months, a level previously only reached twice in all of 2025. First-time homebuyers are increasingly relying on these programs, with their numbers rising 4% year-over-year, while their free market purchases fell 5%. The number of existing homeowners upgrading their properties also decreased by 18%.