Israel's Housing Market Sees Sharp Decline in Sales, Except for Subsidized Units

Israel's real estate market experienced a significant downturn in July 2026, with overall apartment sales dropping 4% compared to the previous year and 12% from June. This marks one of the lowest activity levels recorded in July since the early 2000s, with only July 2002 and 2023 seeing fewer transactions in the free market. When excluding government-subsidized housing, sales in the free market fell by 9% year-over-year and 13% month-over-month.

The decline is particularly pronounced in new apartment sales by contractors in the free market, which decreased by 5% year-over-year and a sharp 22% from June. The southern region saw the most significant drop in new free-market sales, with an 18% decrease compared to July 2025. Cities like Ofakim and Netivot experienced substantial declines of 52% and 30% respectively in new apartment sales year-to-date. The Ministry of Finance attributes the slowdown to restrictions on financing deals, noting that the southern region had a record high in contractor sales in 2024 largely due to such incentives.

In contrast, government-subsidized housing programs, including "Price for Me" and "Reduced Price," saw a surge in activity. In July, 1,110 subsidized apartments were purchased, a 46% increase from the previous year and the third consecutive month exceeding 1,000 such sales. Year-to-date, subsidized sales are up 19%, significantly outpacing the 1% growth in the free market.

Despite the overall slump, some areas showed resilience or unique trends. Haifa led in new apartment sales in July with 313 transactions, a 29% increase from the previous year, though this was influenced by an unusually low base in July 2025. Tel Aviv, which had led contractor sales for four months, returned to its 2025 monthly average in July but saw a 49% drop from June. The central region experienced a notable increase in financing incentives offered by contractors, with 39% of sales including such benefits.

The second-hand market also weakened, with sales down 11% year-over-year and 9% from June, particularly in Tel Aviv, which saw a 36% drop. Investor activity continued to decline, with purchases down 4% year-over-year and 17% from June, representing 15% of all transactions. Investors are also selling more than they buy, reducing their overall housing stock.