Recently, a series of data releases have shed new light on the direction of Israel’s housing market. The latest came with the publication of the Consumer Price Index for May. Housing prices fell by 0.3% last month and by 1.3% over the past year.
Additional data relate to mortgage demand and housing market activity. Mortgage figures published by the Bank of Israel show that in May the public took out NIS 9.7 billion in mortgages – an increase of 19% compared to the same period last year.
On the same day, the chief economist at the Finance Ministry released separate figures. In May, 5,081 new and second-hand apartments were sold. This represents the lowest level in the past 20 years. Sales of new apartments in the free market by contractors were particularly weak.
Analysts say this is no coincidence. Contractor cash flow in the sector turned negative, indicating increasing difficulty in coping with declining sales despite generous financing promotions.
Additional indicators point to continued slowdown in activity. According to a report by the Central Bureau of Statistics, between February and April 2026 a total of 20,610 apartments were sold – an 11% decline compared to the same period last year. Of these, 39% were new apartments (8,050 units) and 61% (12,560) were second-hand apartments.
So how can mortgage data rise while home sales are continuing to fall? Are Israelis taking out mortgages to buy apartments abroad? That is not the case.
Economists point to several explanations, the main one being that the rise in mortgage demand reflects the completion of financing for deals signed roughly a year earlier. Buyers who purchased apartments under financing promotions are now reaching their payment stages. Another factor is the continued rise in housing prices, which requires higher financing levels despite the decline in the number of transactions.
Taken together, May’s CPI data, along with figures from the Central Bureau of Statistics and the Finance Ministry, suggest that the housing market is in a period of stagnation – and some would describe it as a slowdown approaching a crisis. Households appear to be adjusting their purchasing behavior to current conditions and are largely waiting for developments, particularly regarding interest rates.
The data present a mixed picture: Mortgage demand is rising while sales volumes are falling. At the same time, housing prices have declined, yet demand for financing continues to grow.
On the ground, however, the picture is more complex. Some contractors are facing financing difficulties and struggle to secure funding sources. With the support of banks, they are seeking to avoid price reductions in order to prevent collateral-related risks. As a result, many are offering buyers a range of incentives, which, when calculated, amount to roughly 5% of the apartment price. These include financing deals, flexible payment plans, additional fittings, and options to prepare for future expansion.
In the current market environment, buyers are advised to interpret contractor messaging with caution. There is no urgency to rush into purchases, and negotiating power currently appears to be shifting toward buyers.
Market conditions currently resemble a “buyer’s market,” where time appears to be working in favor of purchasers. Negotiation is possible, and apartments are not disappearing from the market.
Claims that housing prices are set to rise imminently should be viewed with caution.
However, for those who have already found a suitable deal and are upgrading their home, caution is also advised before selling an existing property. The waiting period required to avoid higher purchase tax stands at 18 months. It remains unclear how market conditions will evolve over the next year and a half.
Source:
www.jpost.com
