Housing sales in Israel hit 20-year low

New apartments in Harish credit: Shlomi Yosef
New apartments in Harish credit: Shlomi Yosef

The war in Gaza and high interest rates made 2023 one of the worst-ever years for real estate, the Ministry of Finance chief economist reports.

Special offers by real estate developers in the closing days of December contributed to a small recovery in the number of deals last month compared with November but did not change the overall picture. The final quarter of 2023 was the worst for housing sales in the past 22 years and 2023 was the worst years for sales in the past 30 years, according to a survey by the Ministry of Finance chief economist.

In December 2023, there were 6,088 homes sold (including in government subsidized projects), down 15% from December 2022 but up 47% from November 2023. December was the lowest fall in recent months compared with 2022. However, it was the weakest December for housing sales in Israel since the start of the century.

What stood out in December 2023 was the sales by development and building companies, which totaled 2,782 homes, 10% higher than the monthly average in the first eight months of 2023 (sales plunged from September onwards with the holidays and then the war). This explains the optimism in the real estate market. However, the chief economist expresses a certain skepticism about this optimism and attributes it more to the aggressive marketing campaigns by the developers.

The survey says, "Analysis of contractors' sales in the free market over the month, found that the highest relative number of deals were done on the last day of the month and of the entire year, December 31. This finding is not surprising, since it is known that real estate developers, especially those traded on the stock exchange, have a high incentive to generate many deals just before the financial statements for that year are closed. This, in particular due to weakness in sales throughout 2023, in particular after the outbreak of the war."

A further look at the data shows that certain regions boosted the sales of developers on December 31. The Central Region led the sales of real estate developers on the open market and the rise in sales, with 20% of the overall sales for December on the last day of the month. Nationwide 13% of sales were on the last day of the month. A large proportion of the apartments sold on the last day of the month were by the 10 biggest development and construction companies, which strengthens the notion that strenuous efforts were made to improve their financial performance in 2023.

A low-point in real estate of historic proportions

In the Central Region, 90% of sales were in six cities: Petah Tikva, Kiryat Ono, Ramat Gan, Givat Shmuel, Or Yehuda and Bnei Brak, all of which recorded significant growth rates compared with December 2022. "It should be noted that in each of these cities, which stand out in sales, there were major marketing campaigns by contractors, including easing payment conditions (some of them even require a payment of only 5% at the time of purchase and the balance upon delivery), non-linkage to the construction inputs index, etc. These campaigns are not reflected in the price levels themselves," writes the chief economist in the review.

The prices of apartments purchased in these cities were far from low: in Kiryat Ono, the average price of a new apartment purchased last December reached approximately NIS 3.95 million; in Givat Shmuel NIS 3.8 million; in Ramat Gan about NIS 3.5 million; in Petah Tikva NIS 2.6 million; and in Bnei Brak NIS 2.5 million. The salary of households that purchased an apartment in Bnei Brak was the lowest of all - NIS 10,900 per month, while the households that purchased an apartment in Givat Shmuel had the highest income, reaching NIS 44,000 per month.

These efforts in the last days of December did improve the data for the month, but did not really change the bleak picture of Israel's residential real estate market. In the fourth quarter of 2023, 12,500 deals completed. This was the lowest quarterly figure since the chief economist began reviewing the residential real estate market in the early 2000s. From this point of view, it can be estimated that the Gaza war resulted in a fall of 33% in the volume of residential market deals, while previous, high interest rates contributed to a decrease of about 40% in the volume, so this is a situation of historic dimensions.

2023, in which roughly 70,000 apartments were purchased, was the worst year since 2002. However, based on partial data from the years preceding the start of the chief economist's review, it appears that in fact, this was one of the worst years, since the First Lebanon War in 1982 and the hyperinflation of the eighties.

Published by Globes, Israel business news - en.globes.co.il - on February 14, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.

New apartments in Harish credit: Shlomi Yosef
New apartments in Harish credit: Shlomi Yosef
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