5 good reasons to purchase a home in Israel in the current economic climate

With demand at a low point, and developers stuck with a vast stock of tens of thousands of apartments, aggressive sales campaigns have been launched and prices lowered. While it is true that high-interest rate levels weigh heavily on mortgage borrowers, this may just be an opportune time for buyers to jump in and buy at a discount. Buyitinisrael brings you 5 good reasons to purchase a home in the current economic climate.

In recent weeks, the Israeli housing market has been characterized by a historically low level of demand. According to the Central Bureau of Statistics, approximately 40,500 new homes were purchased in 2022, reflecting a decline of 30% compared to the number of homes purchased in 2021, but in truth, this figure does not tell the full story, since most of the reduction in sales has occurred during the past few months. In December 2022, only 2,740 new homes were sold, which is 41% less than in December 2021 and around 52% less than in December 2020.


Current economic conditions such as rising interest rates, inflation, and unemployment, have brought uncertainty and concern, giving buyers good reason to put their home search on hold. But as the legendary value investor, Warren Buffet,  once said it is wise for investors to be “fearful when others are greedy, and greedy when others are fearful.”

At the forefront of the Israeli real estate market and in close contact with developers, marketing firms, and sellers across the country, Buyitinisrael keeps a close eye on what’s happening on the ground. While many buyers and investors may have deserted the market, we bring you 5 good reasons to buy now:

1. Buyers have disappeared

Sales offices are quiet these days with few buyers entering their doors. Residential real estate prices are exorbitant and, after steep hikes that lasted for close to two years, these prices have become prohibitive for many.  In parallel, sharp increases in interest rates in recent months have made it difficult for mortgage borrowers to meet monthly repayments. In addition, the booming high-tech industry which brought vast amounts of money into Israel, and was unquestionably one of the main contributors toward the levels of demand and price increases of the past few years, is currently in a global crisis and significantly weakened.

2. Developers are left with a huge stock of unsold apartments

The slowdown period caught contractors unprepared. In mid-2022, the Israeli real estate industry was thriving, aided by zero interest and huge amounts of money that entered the country. Developers competed for every available piece of land and began to build at an unprecedented rate of 80,000 apartments a year. It was clear to everyone that the celebration could not last forever, but no one could guess how sharp the change in demand would be. When the Bank of Israel began to gradually increase the interest rate, the assessments, including those of the Bank itself, were that within a year the interest rate would reach 2%, or at most 2.5%. This week, the interest rate was revised to 4.25 %, and the end is not yet in sight.

According to data from the Central Bureau of Statistics, at the end of December 2022, the number of new homes remaining for sale reached 53,542 apartments – almost 3,000 more than at the end of November, and 12.5% more than in December 2021, when 47,606 homes remained for sale.


3. A shift in power from sellers to buyers

Those who are currently trying to bargain over the price of an apartment, even when the asking price is high, are finding unusual flexibility and keenness on the part of the sellers– particularly when it comes to the Israeli market. The reason for this is quite straightforward – there are few buyers during this period, and each buyer is dancing with multiple sellers, trying to squeeze out the best possible deal for himself. Furthermore, as interest rates continually increase, developers are feeling the stress of dealing with a sharp incline in financing costs, and are eager to sell as many units as possible in order to quickly repay their loans to the bank.

The result is a decline in price that is already reflected in the home price index — with regard to the purchase of new homes. But beyond that, sales promotions and discounts offered by the various developers are becoming more common and more competitive.

For example, two of the largest contractors in Israel – Azorim and Y.H. Dimri, both selling apartments in the Central Park 17 complex in Be’er Sheva are offering buyers a one-year mortgage repayment in the form of a gift of up to NIS 4,000 per month. In other words, the companies are willing to pay the buyers close to NIS 50,000 for purchasing an apartment. In other promotions, the companies offer loans to supplement the buyers’ downpayment, to the point where buyers can purchase an apartment with almost no equity at all.

4. Renewed price increases may be around the corner

If you have been following the Israeli real estate scene for the past 15 years, you have probably noticed that the almost constant state of the market can be expressed by an upward curve indicating consistent price increases. This is no coincidence – in Israel, there are two fixed data that do not change, which both support an increase in price. The first is a population growth rate of about 2% per year, which is extraordinary compared to other Western countries. The second is a limited amount of land, particularly in high-demand areas.

In the last six months, developers have significantly reduced the volume of construction and are cutting back on the purchase of land. However, as demand for housing rises with natural demographics and as buyers return to the market when interest rates stabilize, the trend will inevitably reverse once again due to a shortage of supply, and we will likely see renewed price increases.

5. A weakened shekel

Following the controversial proposal of the Israeli judicial reform that, according to economic experts, could lead to a halt in investments in Israel and the exit of capital from the country, the shekel has weakened significantly against the dollar. Within a month, the dollar’s value against the shekel increased by around 8 percent from NIS 3.37 per dollar to NIS 3.69 per dollar. Despite the adverse circumstances due to which this development occurred, the purchasing ability of those whose income and savings are in dollars has improved significantly.

Every few years, after periods of prolonged price increases, there comes a short and limited period of stabilization or moderate price declines. Today we are in such a period, yet, despite the difficult conditions of the market, the decline in prices is still not significant. History has shown us that this period cannot be expected to last long. Therefore, waiting on the part of the buyers to purchase a home in this current climate may turn, in retrospect, to be a mistake.

Interested in special offers and discounted new projects across Israel? Whether you’re purchasing a vacation apartment or retirement residence, making a financial investment, or thinking about Aliyah, drop us a line, when you’re ready to talk. Whatever the reason, Buyitinisrael!

The contents of this article are designed to provide the reader with general information and not to serve as legal or other professional advice for a particular transaction. Readers are advised to obtain advice from qualified professionals prior to entering into any transaction.

Share This