Israel’s housing market ends 2023 in deep recession

Israel’s real estate market in 2023 was in a deep recession and there are major concerns that the recession could continue throughout 2024. The number of deals in the first nine months of 2023 totaled 58,000, down 36% from the corresponding period of 2022 and down 46% from the same period in 2021, which was a record year for Israeli real estate.

At the pace of deals in the first nine months of the year, 2023 was shaping up to be the worst year in Israeli real estate for 20 years. The outbreak of the war at the start of the fourth quarter will make the final quarter figures even worse than the preceding three quarters of 2023.

The leading cities in 2022 continued to lead in 2023

A comprehensive survey by the Ministry of Finance chief economist combined with figures from the Madlan real estate sales website, compiled by “Globes,” show, as expected, that the real estate market in the cities that suffered the most from the war have dropped the sharpest in October. However, even in the cities that suffered less from the wars, mainly Netanya and Hadera, there was a particularly sharp decrease in the number of housing deals carried out there.

The chief economist ranks the cities where most apartments were sold in the first three quarters of 2023 compared with the corresponding period of 2022. The four cities that led the way in 2022 stayed at the top in 2023. But in the top three cities: Jerusalem (4,142), Haifa (3,451) and Beersheva (2,979) – the number of deals in 2023 reflected the decline throughout the country. In Tel Aviv, the decline in the number of deals reached 42%, falling from 4,363 deals in the first nine months of 2022 to just 2,539 in the corresponding period of 2023.

Netanya, which was in fifth place in the first three quarters of 2022 in terms of the number of residential real estate deals saw the number of deals fall 52% to 1,700 in the corresponding period of 2023. In sixth place was Ashkelon which saw the number of deals in the first nine months of 2023, before the war, fall 28% to 2,388.

There were also sharp falls in the number of deals in Holon in this period, down 47% to 873, in Hadera down 48% to 762, and in Rehovot, down 46% to 730.

missile alerts were not the only influencing factor

Through Nadlan and processing Tax Authority data, “Globes” sought to gauge the impact of the war on October deals. The data found that, as expected, ‘uninvolved’ large cities like Jerusalem and Haifa saw the smallest declines. But other cities that did not have any missile alerts at all like Hadera and Netanya saw 50% and 40% declines in the number of deals in October compared with the previous months.

Ashkelon unsurprisingly saw the number of housing deals in October slump 90% to 37 from a monthly average of 300, while in Nahariya the number of deals fell 73% in October from a monthly average of 112 to 30. Numbers were also exceptionally low in the Tel Aviv region in October but this is partly explained by delays in deals being registered by the Tax Authority in that region.

Prices have jumped beyond peoples’ pockets

Yankele Zini from the Ish Maftayach in Hadera says, “Whoever doesn’t drop the price today doesn’t sell the apartment.” He adds that prices in the city have risen substantially in recent years and probably no longer match demand.

Hadera has some competition from nearby towns like Or Akiva and Harish, where prices have also risen but are still low enough to attract young couples, who in the past would have bought in Hadera.

According to the Central Bureau of Statistics, the average price of a home bought in Holon in the third quarter of 2023 was NIS 2.21 million, up 11% from the third quarter of 2022. In Netanya prices rose 13% over this period to an average of NIS 2.67 million, while in Ramat Gan the average price rose 6% between the third quarter of 2022 and 2023 to NIS 2.94 million. In an era of rising interest rates, these rises are most significant. This leads us to Tel Aviv where prices rose only 1% between the third quarter of 2022 and the third quarter of 2023, to NIS 4.1 million.

The picture is confusing. Prices have begun falling compared with preceding quarters and the war will only dampen the economy. But interest rate cuts may yet boost the market.

Published by Globes, Israel business news – en.globes.co.il – on January 4, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.