Homeowners Trading Up Face Dilemma in Weak Israeli Housing Market
Translated & summarized from Bizportal by baba
Homeowners in Israel's central region are facing increased pressure to sell their existing homes quickly due to tax benefit deadlines, with nearly a third of move-up buyer sales in August being for "waiting apartments." New data from the Ministry of Finance shows this trend is most acute in the center, where sellers may be forced to offer flexibility or risk substantial financial penalties. The overall inventory of waiting apartments is nearing a record high, and a recent drop in sales suggests buyers may gain more leverage.
The story in 5 lines · by baba
- Nearly a third of move-up buyer sales in central Israel in August were for 'waiting apartments'.
- Homeowners risk losing significant tax benefits if they cannot sell their current home by a deadline.
- The number of waiting apartments in Israel reached 23,095 in August, close to a 2011 record.
- Second-hand apartment sales in August dropped 7% year-over-year, with move-up buyer purchases down 27%.
- Sellers in a weak market may be forced to offer flexibility, shifting bargaining power to buyers.
Homeowners looking to upgrade their properties in Israel are facing significant challenges in the current sluggish housing market. These "move-up buyers," who have already purchased a new home but need to sell their existing one, are finding it difficult to secure buyers for their old properties. This situation is particularly acute for those who risk losing significant tax benefits, potentially worth hundreds of thousands of shekels, if they fail to sell their current home by a set deadline.
New data released by Galit Ben Naim, Deputy Chief Economist at the Ministry of Finance, highlights that this issue is most pronounced in the central region of Israel. In August, nearly a third of second-hand apartment sales by move-up buyers in this area were for "waiting apartments", homes whose owners had already bought a new property but not yet sold their old one. This figure rose from about a quarter of sales in July. In contrast, the Sharon and Shefela regions saw a lower proportion of such waiting apartments, around 15-17% of move-up buyer sales in August, suggesting greater pressure on sellers in the central area.
Ben Naim's analysis includes an example of a homeowner in the central region who, after purchasing a new apartment in late 2024, was granted an 18-month extension to sell their previous home to retain tax benefits. This extension was further prolonged due to Operation "Lion's Roar," allowing sales until August 31, 2026. The seller managed to finalize the sale of their old apartment for 2.7 million shekels on the very last day. Notably, the handover and bulk of the payment were scheduled for nearly a year after the contract signing, a payment structure resembling those offered by contractors, indicating flexibility from sellers to close deals.
The risks for sellers are substantial. If a buyer cancels the deal, the seller could forfeit their tax benefits, potentially facing purchase tax starting at 8% on their new home and losing capital gains tax exemptions on the old one, with liabilities reaching hundreds of thousands of shekels.
Overall, the number of waiting apartments in August reached 23,095, nearing the 2011 peak. At the current pace of second-hand market transactions, it would take over five months to sell this entire inventory. August saw a 7% year-over-year drop in second-hand apartment sales, with move-up buyer purchases declining by 27%. This indicates a significant supply of second-hand homes from owners committed to new purchases, who may not be able to wait indefinitely for their desired price, potentially shifting bargaining power to buyers in a market where they can afford to wait.
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