Drop of 24% in New Home Sales in Israel in Q1; Second-Hand Market on the Rise

While contractor sales plunged in the first quarter of the year, halting the sharp growth that characterized 2024, the second-hand housing market posted a 13% increase in transactions, though it still remained low by historical standards. At the same time, first-home purchases fell below 10,000 units — a one-year low — with a significant share of deals in the periphery dependent on aggressive financing incentives.

By Dror Nir Castel, Nadlan Center

20,570 free-market housing transactions were completed in Q1 2025, a decline of about 2% compared with the same quarter in 2024 and the previous quarter, according to a review by the Chief Economist Division at the Ministry of Finance. The sharp growth in transactions that characterized 2024 came to a halt in early 2025. The relatively moderate drop in Q1 reflected diverging trends between new and second-hand apartments: while contractor sales fell sharply, second-hand sales grew.

Historically, Q1 2025 ranks in the lower third of quarterly transactions since the early 2000s. Regionally, areas with higher price levels, particularly Tel Aviv, recorded lower historical rankings of transactions.

Contractor sales in the free market totaled 6,427 apartments in Q1 2025 — a 24% decline compared with both the same quarter last year and Q4 2024. The steep fall in sales, which intensified in Q2, followed the sharp increase in 2024 fueled by contractor financing campaigns.

The review noted that despite the sharp decline in contractor sales, housing starts remain high. This is reflected in a cumulative positive gap between housing starts and free-market sales in 2020–2025, which reached 25,000 apartments in Q1. Second-hand sales totaled 14,143 apartments in Q1 2025, up 13% year-on-year and 2% compared with Q4, though still low by historical comparison.

First-home purchases in the free market fell below 10,000 units in Q1 2025, for the first time since late 2023. Purchases were down 11% compared with Q1 2024, concentrated mainly in the new housing segment, which saw a 32% drop.

In areas such as Netanya, Hadera, and Be’er Sheva, at least half of first-home purchases relied on financing benefits. In the periphery, financing deals are common where only 15% of the price is paid at contract signing, with the balance — between 60% and 80% — paid on delivery. Altogether, free-market purchases totaled 12,000 units, down about 10% compared with both the previous quarter and year.

Investor purchases totaled 3,520 apartments in Q1 2025, a decline of 2% year-on-year and 7.5% compared with Q4, following consistent growth throughout 2024. This drop accelerated in Q2. A sharp fall was noted in the share of new apartments among investor purchases. The prevalence of financing incentives among investors was slightly lower than among first-home buyers.

Investor sales in Q1 2025 totaled 4,255 apartments, up 6% year-on-year and 11% quarter-on-quarter. The share of apartments sold at a real capital loss stood at 10.5%, four percentage points higher than Q1 2024. Be’er Sheva continues to stand out with a high share of loss-making sales. For the first time, several central cities — Ramat Gan, Petah Tikva, and Holon — also showed relatively high levels of loss sales, compared with near-zero levels in the past.

In the luxury market, unlike the general trend, transactions increased in Q1 2025 compared with Q1 2024, totaling 136 deals versus 105. However, compared with Q4 2024 (152 deals), this represented a 10.5% decline. The share of new apartments in Tel Aviv’s luxury market fell sharply, despite very high unsold inventory levels.

Foreign resident purchases reached 433 apartments in Q1 2025, representing less than 2% of all transactions. Compared with the particularly low levels of Q1 2024, this reflects a 37% increase. However, compared with Q4 2024, purchases fell 12%.