There were 11,261 housing deals in December 2024, the Ministry of Finance chief economist reports, the highest figure since March 2022, as many buyers rushed to purchase new homes before VAT rose from 17% to 18% on January 1, 2025.
In total there were 95,000 housing deals in 2024, 5% below the multi-year annual average but 35% higher than 2023, which was the worse year for decades.
What made 2024 distinct was that 50% of deals involved special offers by contractors for apartments not yet built, with small 10% or 20% down-payments and the remainder paid on occupancy after construction is completed. In December 60% of housing sales in the Harish-Hadera region were these type of deals and 33% in Tel Aviv.
Record sales in the south
In geographical terms, the southern region stood out with near record annual sales. According to Ministry of Finance data, 1,106 new apartments were purchased there on the open market in December, "The second highest level recorded in this region since the beginning of the 2000s." In an annual summary, 6,334 apartments were sold in the south, the highest number for at least 25 years. The Ministry of Finance also stresses that this is the only region with record levels of new apartment sales on the open market in the past year, 21% higher than the previous record in the region in 2015. At the national level, total sales of new homes on the open market last year were 10% lower than the peak levels of 2021.
The real estate crisis is worsening
An initial examination of data raises concerns that 2025 will also be very weak, as a downward trend in the number of deals began in the second half of 2024.
Further evidence of the worsening crisis in the real estate market is the use of financial offers by real estate developers, such as 20% down-payments and 80% on occupancy. According to the Bank of Israel, before the war, the volume of these deals was 20% of all deals, while since the outbreak of the war, their rate has jumped to 50%. This indicates a decline in demand, and attempts by developers and banks to attract buyers with very low initial equity, with the balance paid, when the apartments are completed.
The Chief Economist's examination of the deals carried out in the Central District found that the apartments are expected to be occupied in an average of 3.5 years. The review states that due to the failure to complete the work at the Tax Authority, from which the data is taken, the Chief Economist's staff were forced to extract data manually, which limited the areas examined to the central and southern regions, Tel Aviv, and the Northern Sharon (Hadera-Harish area).
41% of the deals in the southern region, 34% of the deals in the Tel Aviv region, 47% of deals in the central region and 61% in the northern Sharon were within the framework of these 20-80 offers by developers.
An analysis of the payment terms found that in most of these deals, apartment buyers were required to pay no more than 15% of the apartment price up front.
It was also found that there are several versions of these financing deals. For example, in the southern region they include 2 payment installments - at the time of signing the contract and at the time of delivery of the apartment; in the Tel Aviv region, intermediate payments are also required in most cases.
A further analysis found that in the southern region, roughly 60% of the apartment buyers in these developers' offers are young couples, and other first-time homebuyers; in the central region, a third of the buyers are young couples, while in Tel Aviv, those who purchase in this way are mainly investors.
This is a significant change in the target population for these financing deals. Originally (about two years ago), these promotions were intended to encourage buyers to purchase a new apartment before selling theirs, in order to allow them a gap of several years to sell their apartments. But today only 20%-33% of these deals are for this purpose.
Published by Globes, Israel business news - en.globes.co.il - on February 12, 2025.
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