According to the Central Bureau of Statistics, Israel’s new home sales have reached their lowest point in 15 years, as high prices and low demand have discouraged buyers. In the second quarter of 2023, only 17,000 new homes were sold, marking the lowest figure since the aftermath of the US financial crisis in the fourth quarter of 2008. In June 2023, 7,097 new homes were sold, down 33% from June 2022, and down almost 50% from June 2021. This is nothing short of a freefall in a sector that is slow to react to market volatility.
Developers who saw the figures in the first half of 2021, planned for a sustained boom but in the time it took them to plan, build and market new homes, they reached the first half of 2023 and seen sales fall 45% over the past two years at an average of 3.5% per month. One of the results is the failure of a significant portion of Israel Land Authority (ILA) tenders with bids that are tens of percent lower than the ILA appraisals, based on winning tenders at the peak in the supply of apartments. There are now 60,000 new unsold apartments – a number that has not been seen for years.
There is a major contradiction between Central Bureau of statistics data and claims still heard by the government, that there is a lack of apartments. In June, there only an increase from the preceding months in the number of deals carried out by developers, but this was only because developers in the south, especially in Sderot, conducted presales. As a result, Sderot reached eighth place in the country in terms of apartment purchases made there in the second quarter of the year (229), up 247% compared to the number of apartments purchased there in the first quarter.
Rishon Lezion tops the list of new home sales
The city with most new apartments sold in the second quarter was Rishon Lezion with 484 apartments sold, up 250% from the first quarter. In second place was Jerusalem with 403 new apartments sold, down 56% from the first quarter and in third place was Ashkelon with 316 new apartments sold, followed by Beersheva (271), Haifa (270), and Tel Aviv (268).
The large falls recorded in the market have caused the rare situation, in which not only is there no shortage of apartments – but most of them (almost 54%) are concentrated in “demand areas”, such as Tel Aviv and the central district. This is also because developers saw demand for these districts flourish in 2021, while in 2023 the demand for the Central District has decreased greatly, while in the Tel Aviv District demand has been cut by two thirds.
Factors affecting the new home sales
Several factors may have contributed to the slump in new home sales, such as:
- The high prices of new homes, which have increased by more than 20% in some areas over the past year.
- The low availability of mortgages, as banks have tightened their lending criteria and raised their interest rates.
- The uncertainty caused by the political instability and judicial reforms that have rattled investors and buyers.
- The competition from the second-hand market, which offers more variety and flexibility for buyers.
- The COVID-19 pandemic, which has affected the income and mobility of many potential buyers.
Outlook for the future
The outlook for the new home sales market is not very optimistic, as many experts predict that prices will continue to rise and demand will remain low. Some possible scenarios for the future are:
- The government will intervene to stimulate the market by offering subsidies, incentives or tax breaks for buyers and developers.
- The developers will lower their prices or offer discounts to attract buyers and clear their inventory.
- The buyers will wait for better opportunities or switch to other alternatives such as renting or co-living.
- The market will adjust itself through supply and demand forces and reach a new equilibrium.
