Rising interest rates have reduced the number of real estate deals in Israel but have failed to cut prices. Young couples have not abandoned the market, even though the price of an average apartment in the country has reached a record NIS 1.92 million, up 19.8% over the past 12 months, according to the Central Bureau of Statistics, including a 1.1% rise between July-August 2022 and August-September 2022.
Young people are still in the market but they prefer to buy apartments outside of central Israel, mainly on the free market, rather than through government programs. Consequently most homes were bought in the southern region in the third quarter – 3,800 deals, compared with 3,600 in central Israel out of a total of 16,500 homes purchased between July and September, according to initial figures from the Central Bureau of Statistics. Home purchases in the Tel Aviv region fell 40% in the third quarter of 2022 compared with the corresponding quarter of 2021.
By city the most home purchases in the third quarter were in Jerusalem (1,123) followed by Beersheva (1,012) and Haifa (833)> In Tel Aviv only 365 deals were completed, the lowest figure for five years, as buyers can no longer afford the city’s prices.
Homebuyers are mainly purchasing 3-4 room apartments, with two thirds of deals involving apartments of this size. The average price of a four-room apartment has reached NIS 1.93 million, similar to the overall average of apartments purchased in Israel. The average price of a three-room apartment is NIS 1.43 million.
There is a limit to price rises in Tel Aviv
There is a limit to housing price rises even in Tel Aviv. The average price of a four to five room apartment bought in Tel Aviv in the third quarter of 2022 was 10%-15% lower than in the preceding quarter. However, the average price of an apartment purchased in Tel Aviv in the third quarter still rose by 1.1% from the preceding quarter due to sales of three-room apartments.
In six of Israel’s 16 largest cities, the average price of a four-room apartment, the most frequently sold size of home in Israel, fell in the third quarter compared with the second quarter, with the biggest fall of 10% in Tel Aviv. There were also falls in Jerusalem, Beersheva, Netanya, Rishon Lezion and Beit Shemesh. These falls may indicate that overall prices could start falling, especially as mortgage interest rates are set to continue rising.
New home sales plummet
Mortgage lending decline continues
Despite this the average price of an apartment purchased in Israel has risen to nearly NIS 2 million. Until a few years ago, a NIS 2 million apartment was considered prestigious but now it is ‘just’ an average apartment.
Published by Globes, Israel business news – en.globes.co.il – on November 17, 2022.
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