Housing Prices Dip Less Than Builder Financing Perks After Regulatory Curbs

Following Israel's recent regulatory restrictions on builder financing deals, housing prices have seen a decline, but not as steep as the reduction in these financing incentives. In March 2025, the Supervisor of Banks imposed limitations on such offers, which had previously allowed individuals with as little as 7-10% down payment to purchase apartments. This move aimed to curb demand, which had been artificially inflated by these perks, leading to a rise in new apartment sales while second-hand apartments experienced a slowdown.

The war, coupled with high interest rates and the prior judicial reform, had already contributed to a slight decrease in housing prices. Builders responded by offering attractive financing options to stimulate demand, a strategy that proved effective in boosting sales of new homes. However, the Supervisor of Banks' intervention in March 2025 signaled the end of these widespread financing benefits.

In response, builders attempted to circumvent the new regulations by offering subsidized mortgages. Despite these efforts and a significant drop in financing benefits, from around 45% to approximately 23% for new apartments, housing prices have only decreased by about 5% from their peak. This indicates that while financing incentives played a role, other factors like the war and interest rates have had a more substantial impact on the housing market.

The Ministry of Finance acknowledges that the decrease in financing benefits has outpaced the fall in housing prices. This suggests that the removal of builder loans, which were previously capped at 10%, has not led to the expected significant drop in prices, as other market dynamics continue to influence the situation.