Southern Israel Sees Housing Deal Cancellations Amidst Rising Construction

Galit Ben-Naim, former deputy chief economist at the Ministry of Finance, has highlighted a significant trend in the southern Israeli housing market: a surge in canceled purchase agreements alongside continued growth in new construction starts. Data from the Tax Authority reveals that 669 new apartment deals in the Southern District, signed between 2022 and 2025, were canceled as of the second quarter of 2026. This brings the total number of unsold new apartments in the district to 11,457, a figure 6% higher than official statistics, as canceled units are not re-added to the unsold inventory.

Despite the weakening sales and rising cancellations, construction starts in the South are increasing, a phenomenon Ben-Naim finds surprising. In early 2022, before interest rate hikes, the South faced a deficit of approximately 1,200 apartments, meaning demand exceeded new construction. By mid-2026, this had reversed into a surplus of about 11,000 apartments that have begun construction but remain unsold. Ben-Naim suggests a substantial portion of the 669 canceled deals may involve apartments whose construction had already commenced.

Ben-Naim also points to a case involving a buyer who won a lottery for a "Price for the Resident" apartment but had their eligibility revoked. The buyer had previously purchased and then canceled two apartments on the free market, leading to questions about the process and the buyer's current lack of property ownership. She notes that while she has seen buyers cancel purchases before, this instance raises further considerations regarding the implications of such cancellations on project financing and the broader housing market dynamics.