Israel Sees First Drop in New Home Starts in Three Years

For the first time in three years, Israel has experienced a decline in new housing construction starts. In the twelve months between June 2025 and July 2026, construction began on approximately 76,000 new apartments, a 7% decrease compared to the nearly 82,000 apartments started in the previous year. This marks a significant shift from the trend of increasing construction, especially considering that 2025 saw a 30-year high of around 80,000 apartment starts.

The slowdown is particularly noticeable in the second quarter of 2026, with only 17,800 apartment starts, following four consecutive quarters of around 19,000 starts. Despite this recent dip, the overall number of new apartments started in 2026, at a rate of about 75,000 annually, remains historically high. For context, 70,000 apartments started in 2024 and 65,000 in 2023.

While new construction starts have decreased, the number of building permits issued has seen a slight increase of 2%. In the twelve months from July 2025 to June 2026, permits were granted for about 83,340 apartments, up from 81,683 in the prior year. This suggests the slowdown is not due to planning or licensing issues but rather to delays in the execution phase and actual commencement of building.

Experts attribute the slowdown in construction starts to increased financing costs resulting from rising interest rates, coupled with slower sales and a decrease in apartment prices. Developers are reportedly hesitant to begin new projects due to difficulties in securing funding or a perceived higher risk.

Jerusalem stands out with a significant 30.1% drop in construction starts, from 7,788 to 5,440 apartments. In contrast, Tel Aviv saw a nearly 205% surge, largely due to progress in a new neighborhood development on the former Sde Dov airport site. Other cities experiencing sharp declines include Beitar Illit (70.7%), Ashdod (54.0%), Beersheba (33.1%), Lod (31.1%), and Ramat Gan (23.1%).