New home sales drop in Israel to a record low
According to official statistics, in the first three months of 2023, new home sales in Israel totalled 7,960 units, the lowest result since 2015. Even during the pandemic, 9,290 apartments were sold on the market. However, comparing the month-on-month dynamics, 9.4% more properties were sold in March than in February.
According to experts, the increase in sales in March is due to the sale of properties through government programmes. These flats were sold at below-market prices. Demand for them was pretty high. Sales of subsidised housing rose by 48. 5% in March compared to the previous month.
A total of 54,500 new units were put on the market in March, while the time taken to sell property increased. In February, it took 20.5 months to sell a property; in March, this period increased to 21 months. The most significant number of apartments sold was in Jerusalem, with 865 units, followed by Netivot, with 818 units. In third place is Ashkelon, with 425 units sold.
Difficulties in new home sales on the local market
It should be noted that there is an acute shortage of real estate in Israel. According to analysts, the shortage is estimated at 150,000 units. The government has long been trying to solve this problem, but so far, without success. The ideal solution would be to increase construction. But developers can’t start new projects because of the rising cost of materials and the high price of land for construction in the country. The situation is made worse by rising interest rates. In addition, many developers are concerned about falling demand and fear they will be unable to sell properties.
In 2022, the residential property market in Israel showed a price increase of 20.3%, which was a record for the country. At the same time, wages rose by only 4%, making it impossible for many residents to buy homes.
Demand for apartments and houses is highest in Jerusalem and Tel Aviv, but lending rates are higher in these cities. The most affordable neighbourhoods to buy a home in the capital are Arnona and Talpiot. Foreign buyers prefer to buy in Katzrin, Hadera, Hanna and other regions. Housing in the Hashmonaim, Afula and Akiva neighbourhoods is becoming increasingly popular.
A square metre of flat in central Tel Aviv costs between 41,000 and 70,000 shekels. In Jerusalem, the figure is around 44.4 thousand shekels.
According to forecasts, the dynamics of the Israeli market will continue to slow down until the end of 2023. At the same time, the volume of construction will increase, and developers will have to lower prices.