The Israeli housing market, long seen as unstoppable, is now showing clear signs of strain. Fresh data from the Central Bureau of Statistics (CBS) reveals that home prices have fallen for four consecutive months in 2025, amounting to a 1.3% cumulative decline. At the same time, new-home sales have plunged, with transactions down 28% in the first half of the year compared to 2024.
A Shift After Years of Soaring Prices
For over a decade, Israeli real estate seemed immune to downturns. Even global recessions and regional instability didn’t cool the market. But the latest figures suggest that cracks are forming. Between June and July 2025, home prices slipped another 0.2%, while new apartments saw a sharper 0.8% drop.
This isn’t just a statistical blip. Developers are reporting unusually high levels of unsold inventory, and in some cities, sales of new units in June were nearly 50% lower than a year earlier.
What’s Driving the Decline?
Several factors are weighing on the market at once:
- High mortgage costs – With interest rates elevated, financing has become much more expensive for Israeli families.
- War and uncertainty – Geopolitical risks are making buyers hesitant, especially investors who previously drove up demand.
- Excess supply – A surge in new construction has left developers holding onto projects that the market isn’t absorbing quickly enough.
- Tax changes – The VAT increase on new homes from 17% to 18% added an extra burden for buyers already stretched thin.
Investors Step Back
Investor demand, which once made up a significant portion of the market, has cooled dramatically. Many are waiting on the sidelines, hoping for lower prices or clearer economic conditions. Meanwhile, developers with large unsold projects face mounting financial pressure.
What Happens Next?
The big question is whether this is a short-term correction or the start of a more sustained downturn. Some real estate professionals argue that if the war situation stabilizes and interest rates ease, pent-up demand could quickly push prices higher again—possibly by 10–15% over the next year. Others warn that the current slowdown could deepen, especially in weaker submarkets far from Tel Aviv and Jerusalem.
Takeaway for Buyers and Sellers
For buyers, especially first-time homeowners, this may represent the first window of opportunity in years. For sellers and developers, however, it signals a tougher environment where pricing power is no longer guaranteed.
