Israeli Housing Market Sees Surge in Bulk Apartment Deals Amidst Freeze

Israel's frozen housing market, characterized by a growing inventory of unsold apartments held by contractors, has created an opportunity for bulk deals. Real estate investment trusts (REITs) specializing in long-term rentals are acquiring dozens of apartments at discounted prices from developers. The latest reported deal involved Azorim Living, managed by Eran Anav, purchasing 80 apartments in the city of Azor from construction company Tzvi Tzarfati for approximately NIS 198 million, or NIS 2.5 million per apartment. This sale reflects a roughly 15% discount on the fair market value, indicating the seller's distress.

Since the beginning of 2026, at least 15 such transactions have been recorded, totaling 712 apartments and an estimated NIS 1.6 billion. The average price per apartment in these deals, excluding one for apartments leased to Amidar in Kiryat Ata, stands at about NIS 2.6 million. Abu Megurim, led by entrepreneur Tzachi Abu, has been the most active REIT this year, acquiring 248 apartments for NIS 420 million, followed by Megurit with nearly 200 apartments for close to NIS 600 million.

Despite these significant volumes, the deals represent a small fraction of the total unsold inventory held by contractors. REITs report an increase in developer inquiries but caution against characterizing them as liquidation sales. "There is a freeze in the market for apartments for sale," stated Sharon Tusiya-Cohen, founder and CEO of Rent It, attributing it to expectations of interest rate cuts, potential price drops, and the geopolitical situation. This freeze shifts demand to the rental market and leaves contractors with excess inventory.

REITs are acquiring apartments at discounts ranging from 10% to 20%, with larger discounts applied to properties with long-term restrictions like the "Apartment for Rent" program. Some sellers, like Almogim, have reported potential losses on these bulk sales, though they cite benefits such as improved sales ratios and reduced financing costs. Conversely, Tzvi Tzarfati expects a pre-tax profit of around NIS 47 million from its sale to Azorim Living.

Megurit, a leading long-term rental REIT, has shifted its acquisition strategy to focus on apartments nearing completion or ready for immediate delivery, a change from its previous emphasis on pre-sale purchases. This strategy avoids financing costs and allows for immediate rental income. While acknowledging increased developer interest, Megurit's chairman Erez Rosenbuch notes that many strong developers are not under pressure to sell and are unwilling to offer significant discounts, suggesting the market is functioning rather than in a severe crisis.

REITs describe strong demand and near-full occupancy (98%-100%) in their long-term rental projects, with waiting lists in some older properties. The current market conditions are seen as promoting the advantages of long-term rental housing. The primary challenge for most potential renters is not the monthly rent but the difficulty in raising the down payment for ownership, leading some to prefer investing capital in the stock market. Rental prices have been increasing by 4%-5% annually for three consecutive years, with REITs differentiating themselves through long-term contracts and professional management.