Israel's Housing Market Sees Sales Plunge, Record Unsold Inventory

Israel's real estate market is experiencing a significant downturn, characterized by a sharp decrease in transactions and a growing surplus of unsold homes. Data released by the Central Bureau of Statistics (CBS) on Thursday revealed that 21,750 housing units were sold between July and September 2026, marking a 5.7% drop from the previous quarter and a 7.3% decrease year-over-year. The decline is particularly pronounced in the resale market, where sales fell by 14% compared to the same period in 2025. In the new construction sector, transactions decreased by 12% from the prior quarter, despite a 4% annual increase. This weakened demand has led to an accumulation of unsold properties held by developers. By the end of September, their inventory reached 85,080 new housing units, equivalent to nearly 26 months of sales at the current pace. Jerusalem and Tel Aviv have the largest concentrations of unsold apartments, each with over 10,000 units, followed by Bat Yam with nearly 5,000 and Ramat Gan with approximately 4,000. The Central and Southern regions, however, remain the most active in terms of transactions, with Kiryat Gat leading sales of new homes, partly due to subsidized housing programs. Ministry of Finance figures corroborate this trend, showing significant regional variations. In September, transactions in Tel Aviv plummeted by 34% and in Jerusalem by 21% year-over-year. Conversely, the Haifa region saw a 49% increase, largely driven by activity in Acre, while the Beer Sheva region also showed recovery with a 19% sales increase after eight consecutive months of sharp declines. In response, developers are offering various financing incentives, including deferred payments and credit facilities, to attract buyers without necessarily lowering listed prices. The investment market has been severely impacted, with only 849 homes purchased by investors in September, a 29% annual drop. This contraction could eventually reduce the supply of rental properties, even as rental demand continues to rise. Foreign buyers, however, have shown renewed activity, with their purchases increasing by 33% in September compared to the previous month, a common trend during the Jewish holiday season. According to the Ministry of Finance, 54% of foreign buyers hold American passports, 17% French, and 8% British. These foreign purchases are insufficient to reverse the overall trend of a weakened Israeli housing market facing substantial unsold inventory.