Israel's Housing Market Shows Mixed Signs of Recovery in Mid-2026

By mid-2026, Israel's housing market exhibits a complex picture with some recovery in new home sales and mortgage volumes, while the resale market continues to weaken. Data from the Central Bureau of Statistics and Bank of Israel indicate an increase in new apartment sales and a peak in mortgage issuance in June, suggesting heightened activity compared to last year. However, this recovery is uneven, largely driven by a limited number of new projects and supported by financing incentives unavailable in the resale market.

According to the Ministry of Finance's chief economist, new home sales have risen, but the second-hand market remains subdued, reflecting cautious behavior among existing homeowners. The disparity stems from developers' ability to offer financial benefits such as deferred payments and discounts, which private sellers typically cannot provide. Notably, in Tel Aviv's Shde Dov area, two projects accounted for 44% of new home sales in May, highlighting concentrated demand. Nationally, the top ten developers were responsible for 26% of sales, up from 19% the previous year.

Financing incentives have adapted despite Bank of Israel restrictions, with 43% of transactions in Jerusalem and 37% in Rehovot including such benefits. First-time buyers have returned to the market, increasing purchases by 28% year-over-year, while investors, including REIT funds, have also expanded activity by acquiring about 100 new apartments in May. Conversely, home upgraders are the only segment showing a decline in transactions, possibly due to economic uncertainty.

Despite improved sales, the inventory of new apartments remains high, with over 84,000 units unsold nationwide, equivalent to nearly 29 months of supply at current sales rates. Jerusalem alone has more than 10,000 unsold new homes, correlating with the prevalence of financing incentives there. Regarding the "Price for Residents" affordable housing program, resale rates vary by city: 43% of winners in Lod have sold their units, 37% in Afula, and about 20% in Rishon Lezion, where demand is stronger. Capital gains from these sales are substantial, reflecting the large gap between subsidized and market prices.

Overall, while the housing market is more active than a year ago, it remains far from a broad recovery. The coming months will reveal whether this is the start of a sustained upturn or a limited, localized rebound.