Housing Market Decline Continues: 30% Drop in Home Sales, 46% Decline in Contractor Sales

Data from the Chief Economist at the Ministry of Finance for June shows a steep housing market decline, with total real estate transactions down 29% from last year, contractor sales slashed by nearly half, and investor purchases plunging 36%. The sharpest falls were in Tel Aviv and Bat Yam. According to the Finance Ministry, the housing market decline stems from new financing restrictions and the impact of the war. The President of the Israel Builders Association warned, “The conduct of the state in general, and the Bank of Israel in particular, is leading us to a new low.”

By Doron Breitman, Nadlan Center

According to the June residential real estate review conducted by the Chief Economist’s Department at the Ministry of Finance, the decline in real estate transactions in the free market continues. The report reveals a total of 5,844 transactions in June, including government-subsidized apartments. This represents a 29% decrease compared to the same period last year, and a 13% decrease compared to the previous month. Excluding subsidized sales, the total number of transactions stood at 5,331—a 29% drop compared to the same period last year and a 12% decrease compared to the previous month.

The Ministry of Finance notes that, as in previous months, the main factor behind the drop in transactions is the decrease in contractor sales, which totaled 1,954 apartments in June (including subsidized units). This marks a 46% drop compared to the same period last year and an 18% drop compared to the previous month.

According to the Ministry, the housing market decline has intensified over the past three months since the Bank of Israel imposed restrictions on financing benefits offered by contractors. A particularly sharp drop in contractor sales was recorded in the Tel Aviv tax district (which includes only Tel Aviv and Bat Yam), where just 137 apartments were sold in June. In the first half of 2025, a total of 1,014 new apartments were sold in these two cities in the free market—a 43% decrease compared to the first half of last year.

The Ministry of Finance stated: “It is reasonable to assume that Operation Rising Lion, which began on June 13, had a significant impact on the low number of sales. However, the fact that second-hand sales declined at a much milder rate than new home sales indicates that, beyond the war, other factors contributed to the sharp drop—especially in contractor sales.”

16% Drop in Second-Hand Home Sales

In June, a total of 3,890 second-hand apartments were sold, down 16% compared to June last year and 10% compared to the previous month. In the first half of 2025, this market segment still showed a modest 3% increase compared to the same period last year, although transaction levels remain low overall.

Investor purchases in June totaled just 847 apartments—a sharp 36% decline compared to June 2024—continuing steep drops in the previous two months and more moderate declines in the first quarter of the year. Compared to the previous month, investor purchases were down 9%. Investors accounted for 14% of all transactions, similar to the previous month but two percentage points lower than in June last year. Of the apartments purchased by investors in June, 39% were new—1% lower than the previous month and 12% lower than June last year. Regionally, Tel Aviv stands out, where the share of new apartments in investor purchases plunged from 72% in June last year to 48% in June this year.

Foreign resident purchases, which are included in the investor segment, totaled 101 apartments in June—a sharp 37% drop from the same month last year, following declines of 20% in each of the previous two months. After accounting for the 34 apartments sold by foreign residents, their net purchases came to just 67 units, down 42% year-on-year. Overall, in the first half of 2025, foreign residents’ net purchases reached 543 apartments, representing a modest 2% increase compared to the same period last year.

Geographically, about half of the apartments purchased by foreign residents in June were concentrated in the Jerusalem area. In the Netanya and Tel Aviv areas, foreign residents bought 20 and 14 apartments, respectively. Investor sales in June totaled 1,103 apartments—a 24% drop compared to June 2024, a sharper decline than what was seen in total second-hand sales. Compared to the previous month, investor sales fell by 10%.

First-home purchases in June totaled 3,240 apartments, including subsidized units—a sharp 31% drop compared to June last year. Excluding subsidized sales, first-home purchases in the free market totaled 2,727 apartments—a 33% decline compared to June last year—following drops of around 20% in the previous two months and more moderate declines in the first three months of the year. Upgrader purchases in June totaled 1,756 apartments, down 20% compared to June last year—the mildest drop among all segments.

President of the Israel Builders Association, Roni Brik, strongly criticized the report’s findings, saying: “Once again, we see clear proof that the conduct of the state in general, and the Bank of Israel in particular, is driving us to a new low in the shortage of housing solutions in Israel and the decline in the housing market. Developers must weigh risks, and CBS data already show a drop in housing starts. Make no mistake—‘apartments on the shelf’ is a misleading term. These may have building permits, but that doesn’t mean construction is about to begin.”

“More serious than the daily decline in the number of people who can afford to buy a home are the figures showing a collapse in investment purchases—most of which should have flowed into the rental market. This is happening at a time when an unprecedented number of people needing shelter will be forced to rent rather than buy. It is happening when high interest rates—still the market’s biggest problem—are driving continued rent hikes. Rent prices make up more than a quarter of the Consumer Price Index. It’s time for state institutions—from the government to the Bank of Israel—to wake up and realize that the longer they fail to address the needs of the construction and infrastructure sector, the more they are creating the worst economic tsunami Israel has faced in decades.”