Israeli Housing Market Shows Mixed Signals Amid High Inventory
Translated & summarized from Bizportal by baba
Israel's housing market shows a 11.1% rise in sales in June-August compared to the previous quarter, but this is partly due to seasonal factors and a 35.8% share of subsidized sales. A record 85,680 new apartments are unsold, creating buyer leverage and pressure on developers. Second-hand apartment sales are declining, and regional price variations persist. High mortgage rates remain a significant barrier for many potential buyers.
The story in 6 lines · by baba
- 85,680 new apartments remain unsold in Israel, representing over two years of sales.
- New apartment sales rose 11.1% in June-August, but 35.8% were government-subsidized.
- Second-hand apartment sales declined 1.4% year-on-year in the June-August period.
- A 41% increase in canceled deals since the start of the year highlights buyer financial risks.
- Regional price trends vary, with some areas seeing declines and others slight increases.
- High mortgage rates continue to limit purchasing power for many Israeli families.
Israel's housing market is presenting a complex picture, with rising sales figures potentially masking underlying weaknesses, according to new data from the Central Bureau of Statistics. While sales of new apartments increased by 11.1% in June-August compared to the previous three months and 8.1% year-on-year, a closer look reveals a more nuanced trend. After adjusting for seasonal fluctuations, sales actually declined by 2.9% in the recent period, suggesting that the reported recovery is partly due to calendar effects rather than a robust increase in basic demand. The comparison to the previous year is also complicated by the impact of the war and economic disruptions.
A significant portion of the new apartment sales, 35.8% in June-August, were government-subsidized. This indicates that the increase in transactions is largely driven by individuals utilizing government programs, which often offer substantial discounts, rather than a broad public willingness to pay market prices. In contrast, sales of second-hand apartments have weakened, showing a 1.4% decrease year-on-year in the same period, with a trend of monthly declines since April.
The most striking figure is the massive inventory of 85,680 new apartments available for sale at the end of August, representing approximately 26.7 months of sales at the current pace. This substantial overhang puts pressure on developers to maintain high prices, especially as potential buyers face high mortgage rates, with new mortgages often priced around 5%. The average net monthly income for an Israeli family is NIS 22,600, making a NIS 1.5 million mortgage at 5% a significant burden, consuming about 40% of their income.
Despite the overall market conditions, buyers currently benefit from a wide selection and increased bargaining power, leading to various incentives like financing deals, deferred payments, and upgrades. However, these concessions can mask the true economic cost of a purchase. Furthermore, a rise in canceled deals, up 41% year-to-date, highlights the financial risks buyers face when securing future payments in a high-interest environment.
The inventory is unevenly distributed, with Tel Aviv and the Central District holding over half of the available new apartments. While some areas like Kiryat Gat saw significant sales increases, Tel Aviv experienced a 27% drop in new apartment sales. Price trends also vary regionally, with some areas seeing annual declines while others show slight increases. Looking ahead, a slowdown in new construction starts, down about 7%, could eventually reduce future supply, potentially balancing the market in the long term. However, in the short term, the large inventory, cautious buyers, and expensive financing favor purchasers.
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