Israel's Housing Market Slows as Fewer Households Plan to Buy Homes in 2025

Dr. Doron Saig, head of housing indices at the Central Bureau of Statistics (CBS), reported a significant slowdown in Israel's real estate market during a panel at the "Era of Regulation" conference organized by the Mortgage Advisors Association. He revealed that the percentage of households planning to purchase a home dropped sharply from 8% to 3.6% in 2025. This decline aligns with a 10% decrease in real estate transactions compared to 2024, with around 90,000 deals completed in 2025. New home sales fell by approximately 12%, and housing price indices have been declining for several months, indicating a market slowdown.

Saig clarified that the housing price index is a macroeconomic measure and does not reflect effective prices or financing costs, which are part of the broader credit market. Supporting this view, Matan Shitrit, chief economist at Phoenix Group, emphasized that young couples' ability to buy homes is currently very limited, not due to interest rates but because housing prices have risen much faster than average household incomes. He noted that the attractiveness of real estate as an investment has diminished, with investors shifting funds to deposits, mutual funds, independent trading, savings policies, and other investment channels over the past two to three years.

Shitrit explained that the cost of financing exceeds 4%, while rental yields remain around 2.5% to 3%, making real estate less appealing compared to other investments. He added that those relying on property value appreciation for returns should reconsider given the current market conditions. Despite the short-term challenges, Shitrit expects housing prices to continue rising in the long term due to demographic growth and economic expansion, similar to other financial assets like broad stock indices.