Apartment sales jumped 14% in January amid ongoing war, new figures show

Israel’s housing market is showing first signs of a recovery after taking a hit in the first three months of the war with the Hamas terror group.

The number of apartments sold in January rose 14 percent year-on-year, with 8,053 transactions recorded, the highest figure since September 2022, according to the monthly real estate report by the Finance Ministry’s chief economist released on Tuesday. When compared with December 2023, the number of deals in January 2024 jumped 32%.

“This is the first month since March 2022 — one month before the Bank of Israel started to hike interest rates — that an increase in the number of deals has been recorded compared with the same month a year earlier,” the Finance Ministry’s chief economist Shmuel Abramzon said in the report.

Abramzon attributed attractive financing conditions that contractors are offering to buyers as one of the main reasons for the recovery and sharp growth in sales.

Excluding government-subsidized apartment sales, 7,072 homes were sold in January, an increase of 8% compared to the same month last year, marking the highest level since November 2022, the data showed.

During January, a total of 3,716 new homes were sold by developers and contractors, a surge of 46.2% year-on-year, and the highest figure since May 2022. The largest increase in sales was recorded in the city of Beersheba, where 463 new apartments were sold on the free market.

Firefighters extinguish a fire at a home in Kfar Yuval that was hit by anti-tank missile fire from Lebanon, February 22, 2024. (Fire and Rescue Services)

Transactions for secondhand residential units in January amounted to 4,337, showing a moderate decrease of 4.7% compared to January last year, after double-digit declines in previous months.

“The data is consistent with the recovery in sales offices, and we believe this trend will continue and gain traction during the coming year,” said Dror Ohev Zion, founder and CEO of residential project marketing and sales agency Dara. “A recovery is seen mainly in the sale of new apartments in the central region and Jerusalem, due to the war, which strengthened the demand for new apartments with a safety room and weakened the demand for homes in the northern and southern regions of the country.”

Back in December the number of homes acquired — 6,088 — was 15% lower than a year earlier, a figure representing the lowest number of homes purchased in that month in over two decades.

The war broke out on October 7, when Hamas led an onslaught in which terrorists from Gaza killed about 1,200 people in Israel, a majority of them civilians, including children and the elderly, and abducted more than 250 people under a deluge of rocket fire aimed at population centers all over Israel.

Palestinian workers, upon which the construction industry relies, disappeared overnight, as Israel enacted an immediate ban on workers from Gaza and restricted access to most of those from the West Bank. Thousands of foreign workers from China, Thailand, the Philippines and other countries also went home following the shock attack, as the economy ground to a halt. In recent weeks, building sites have been getting back to work after weeks of being shuttered.

Even before the outbreak of the war, the Israeli housing market experienced a slowdown in real estate deals as interest rates gradually spiked to 4.75% from a record low of 0.1% in April 2022. Higher borrowing costs hit existing and potential mortgage holders hard, with the majority of home loans in Israel tied to variable rates.

A building site in Sderot that was struck by a rocket, injuring three, on May 2, 2023. (MDA)

On January 1, the Bank of Israel cut the base lending rate, for the first time in almost four years, by 25 basis points from 4.75% to 4.5% to support households and businesses as the economy was getting battered due to the Hamas war, and as the inflation environment was easing. Borrowing costs are expected to come down to a range of 3.75% to 4% by the end of the year.

“It is important to remember that all this is happening when interest rates have not yet dropped significantly. As the interest rate continues to fall as can be expected, demand will increase,” Ohev Zion remarked.