Israel’s red-hot housing market appears to be slowing down. A new report this week by the Central Bureau of Statistics (CBS) on new home sales between May and July detected a 9.9% fall compared to the previous three-month period, or 10.9% when adjustments for seasonality are made.
In this period, about 10,520 apartments were sold, 22.6% of them as part of government-subsidized housing schemes like “Mehir Matara” (Target Price). This is compared to 11,750 for February-April 2022.
July’s home sale numbers alone show a 5.3% fall compared to June.
Between May and July, Netanya, Tel-Aviv-Yafo, Jerusalem and Ashkelon all posted sales of more than 400 housing units. There was meaningful growth in the previous quarter in the number of properties sold in Netanya, Bat Yam, Or Yehuda, Ramat HaSharon, Dimona, Eilat, Bnei Brak and Afula.
But sales fell considerably in Ashkelon, Ramat Gan, Beit Shemesh, Rishon Le’Zion, Beersheba, Ashdod, Petah Tikva and Harish. Even Tel Aviv-Yafo saw a decline in the number of homes sold, although only by 2.6%.
Price increases are a significant factor in this apparent slowdown, as fewer people can afford to buy.
New housing figures released by CBS on Thursday showed that while prices are still rising across most parts of the country, the rate has slowed from 2% in May-June to 1.3% growth in June-July, taking the annual price increase over the last year to 17.9% compared to the same period last year.
The fastest annual price increase was seen in Israel’s central region — over 20% in June-July 2022 compared to June-July 2021, followed by the Haifa area (18.3%), northern Israel (16.9%), Tel Aviv and its surroundings (16.5%), southern Israel (16.1%), and the Jerusalem area (15.7%).
Higher interest rates, which directly affect the affordability of new mortgages, are also playing a role.
Earlier this month, the Bank of Israel noted a slowdown in mortgage borrowing, even as the average mortgage loan has climbed due to price hikes.
Last month, the central bank delivered its biggest increase in two decades to the benchmark interest rate, raising it by 0.75 points to 2.0% as inflation reached 5.2% over the past 12 months. This followed another 0.75% increase in July, and the expectation is that rates (and therefore monthly mortgage payments that are not fixed, but are tied to the prime rate in some way) will continue to rise accordingly.
Additional reports by the CBS and central bank are expected in the coming days and will give clearer indications about where the housing market stands.
While the North American housing market appears to be headed toward a correction, real estate industry experts in Israel are not betting on such a scenario. The prevailing view locally is slower growth in volume and prices.