Israeli Residential Real Estate Market at Historical Low

Strategic Insights -

The Israeli residential real estate market is facing a sharp decline in sales and a rise in pressure on developers due to high interest rates, high construction input prices, and a slowdown in construction. According to S&P Maalot's updated forecast, home prices are expected to continue to fall until the second half of 2026, with insolvencies among highly leveraged developers likely to increase. The report highlights the significant fall in the number of home purchases, which accelerated at the beginning of 2025, and the record-high stock of unsold new homes.

Key Takeaways:

  • The Israeli residential real estate market is at a historical low, with growing pressure on developers due to high interest rates, high construction input prices, and a slowdown in construction.
  • The number of home purchases fell by 28% in the first seven months of 2025 compared to the corresponding period in 2024, driven by high interest rates and the Bank of Israel's restrictions on special offers.
  • The rate of building starts has grown to 67,000 units in 2024, compared to 63,000 in 2023, despite a slowdown in construction caused by manpower shortages.
  • The stock of unsold new homes has reached a record high of approximately 82,000 units at the end of July.
  • Developers have started to cut back on project starts, with a 5.5% fall in building starts in the second quarter of 2025 compared to the previous quarter.
  • The Home Price Index fell by over 2% in June-August, with real prices falling even sharper due to inflation and financing costs.
  • Developers are absorbing substantial costs to offer benefits to keep sales moving, while construction costs have risen due to the absence of Palestinian workers and a 5% rise in the Building Inputs Index.
  • The slowdown in sales and erosion of profitability will worsen the cash flow of developers until the interest rate is reduced and sales pick up.
  • In the base scenario, assuming an interest rate cut, sales are expected to pick up in the second half of 2026, supporting a moderate rise in prices.

Statistics:

  • 28%: Fall in the number of home purchases in the first seven months of 2025 compared to the corresponding period in 2024.
  • 67,000: Number of building starts in 2024, compared to 63,000 in 2023.
  • 82,000: Record-high stock of unsold new homes at the end of July.
  • 5.5%: Fall in building starts in the second quarter of 2025 compared to the previous quarter.
  • 2%: Fall in the Home Price Index in June-August.
  • 5%: Rise in the Building Inputs Index over the past year.
  • 2026: Second half of the year when sales are expected to pick up and home prices are expected to rise moderately.

Sources:

  • S&P Maalot, "Israeli Residential Real Estate Market at Historical Low"
  • Globes, Israel business news en.globes.co.il, October 21, 2025.