Israel's Housing Market Faces Steep Decline in Completed Apartments

Israel's real estate market is experiencing a significant downturn, with a sharp 13.7% decrease in completed apartments during the second quarter, according to the Central Bureau of Statistics (CBS). This decline in finished units, coupled with a roughly 10% drop in new construction starts, signals potential future price increases as supply struggles to meet demand. The situation is exacerbated by ongoing construction delays attributed to labor shortages, rising building costs, and contractors holding back on permits.

While the number of building permits issued saw a modest 2% annual increase, reaching approximately 83,340 units, this does not translate into immediate housing availability. The central and Tel Aviv regions led in permit issuance. However, over the past year (July 2025 to June 2026), construction started on about 76,040 units, a 7% decrease from the previous year, with net new construction starts falling by 6.5% to around 70,320 units.

The data reveals that about a quarter of new construction starts were in the Central District (25.3%), followed by Tel Aviv (22.9%) and the Southern District (18.4%). A significant portion, 69.9%, of these new constructions are intended for sale, with 13.3% under government subsidy. Over 30% are for self-construction or combination projects.

In urban renewal projects, construction began on approximately 17,670 units, with nearly half in Tel Aviv and a third in the Central District. Most of these (84.4%) are part of Tama 38 or "evacuation-reconstruction" initiatives. Tel Aviv-Yafo saw a 19.9% increase in new construction starts over the past year, while Jerusalem experienced a 30.1% decrease.

The most encouraging figure comes from completed construction, which rose by 7.9% over the last 12 months to approximately 60,970 units. The Central District accounted for the largest share of these completions (25.5%). The average construction time for a building was 31.8 months, or 37.3 months when weighted by the number of apartments.