Israel's Housing Market Sees Sharp Decline in Sales

Israel's residential real estate market experienced a significant downturn in July 2026, according to a report from the Ministry of Finance's chief economist. Following modest gains in May and June, July saw only 7,692 apartment sales, a 4% decrease from July 2025 and a sharp 12% drop from the previous month. While the monthly decline is partly attributed to the "Three Weeks" mourning period, the report highlights that sales in the free market, excluding government-subsidized units, reached one of the lowest levels for July since the early 2000s.

Contractors' sales incentives and financing benefits are proving increasingly ineffective in stimulating demand in the free market. Despite a rise in reported financing benefits to 27% of free market contractor sales in July, up from 20% in May, contractor sales in this segment plummeted by 22% compared to June and 5.4% year-on-year, totaling just 1,858 units. The overall increase in contractor sales to 2,968 units was driven entirely by a surge in government-subsidized purchases.

The proportion of apartments sold "on paper" stabilized at 57%, a 10 percentage point decrease from the peak in March 2025 before stricter Bank of Israel financing regulations took effect. The southern region, particularly cities that previously relied heavily on aggressive financing deals, showed particular weakness. Beersheba saw a 74% drop in free market contractor sales in the first seven months of 2026 compared to the same period in 2025. In Netivot, sales decreased by 30% year-to-date, with an unusually high 44% of all cancellations in the southern region occurring there. Ofakim experienced a 52% sales decline.

The second-hand market also weakened, with a 10.6% year-on-year decrease and an 8.5% monthly drop, totaling 4,724 transactions. Tel Aviv saw a significant 36% decline in second-hand sales compared to July 2025. First-time homebuyers in the free market purchased 5.4% fewer homes than in July 2025, with the overall increase in this segment attributed to a 46% rise in subsidized purchases, concentrated in Kiryat Gat, Migdal HaEmek, Rekhasim, and Ramat Gan.

Investor activity continued to decline, with purchases down 4% year-on-year and 17.7% month-on-month, totaling 1,146 units. Investors sold more than they bought, reducing their housing stock by 220 units. Purchases by foreign residents also dropped sharply, down 12% year-on-year and 25% month-on-month, to just 115 units, primarily in the Jerusalem area. Homeowners looking to upgrade also saw a significant decrease in purchases, down approximately 18% compared to both the previous month and July 2025.