Record numbers in 2021 — 11.3% increase in prices, and a 37% increase in new home sales

Latest data on the Israeli housing market indicates that huge demand for apartments in 2021 led to the breaking of all-time records for new home sales. In Tel Aviv and Ashkelon, the largest number of new apartments ever recorded were purchased, more than 4,000 in each city, while in Jerusalem, 2,900 new apartments were purchased. However, in Beit Shemesh, there was actually a 20% decrease in the number of new apartments purchased. What is clear, is that 2022 will be different: purchase tax for investors and the return of lotteries for qualifying buyers to purchase subsidized apartments are expected to bring some calm to the market.

Unprecedented numbers of new home sales threw the Israel real estate market to a sharp annual price increase of 11.3 percent, the sharpest increase in a decade, according to data published by the Central Bureau of Statistics (CBS). This increase occurred as a result of an extraordinary amount of new apartments purchased in 2021. A total of 56,060 new homes were sold during the year, reflecting a 37.3% increase in new home purchases compared to 2020.

While the volume of purchases was high throughout the year, sales peaked during the fourth quarter, after the government’s announcement that it intended to increase the purchase tax on investors.  This led to several weeks, from the date of announcement until implementation, in which the volume of purchases by investors was exceptionally high. A total of 16,500 new homes were purchased in the last quarter of the year, approximately 35% higher than the volume of purchases in the last quarter of 2020.


However, now that the purchase tax has been raised for real estate investors, market experts predict that new home sales in Israel will slow down and that prices will continue to increase but at a more moderate rate. After a year in which home prices have jumped by more than 11%, it is estimated that in 2022 the increases will be more reasonable, around 5%.

In addition to the increase in purchase tax for investors, 2022 is expected to see another moderating factor — the return of mass lotteries for the purchase of subsidized apartments on state land, which is also expected to slow down price increases. Although the “Mechir LeMishtaken” program of former Finance Minister Moshe Kahlon is being replaced by the “Mechir LeMatara” program of Minister of Construction and Housing Ze’ev Elkin, the principle remains the same: the right of first-time homebuyers to purchase a new apartment at a discount of hundreds of thousands of shekels from the market price. According to media reports, the Government is expected to sell 30,000 such apartments during the year, and this is expected to have a strong effect on the sale of apartments on the free market, as first-time home buyers will exit that market.

The Central Bureau of Statistics publishes the volume of new homes sales in Israel, by city. In Tel Aviv, 4,111 new apartments were purchased, the largest number in any city, representing an increase of 36% compared to 2020. In Ashkelon, a similar amount of new apartments were sold – 4,070, an increase of 51% compared to the previous year, and in third place was Jerusalem, where 2,848 new apartments were purchased, 115% higher than the year before. Ramat Gan is fourth in line, with 2,464 new apartments purchased last year.

But at the top of the list of cities where there have been the sharpest increases in the number of apartments purchased is Bat Yam.  The number of new apartments sold there, 2,057 is more than five times the number of new apartments sold in the city in 2020. Modi’in is second on the list, and the 1,843 new homes purchased there last year reflect a 244% increase compared to 2020. A sharp increase of 227% was also recorded in Givat Shmuel, where a total of 808 apartments were purchased, and in Bnei Barak where 1,222 apartments were purchased, reflecting an annual increase of 218%.

Despite the massive increase in the purchase of apartments at the national level, in a small number of cities in Israel, there was actually a decline in the number of new apartments purchased. In Beit Shemesh, there were 1,741 new home sales, 19.5% lower than during the previous year. In Beersheba, there was a decline of 12%, where only 974 apartments were purchased, and in Kiryat Gat in the northern Negev, only 740 apartments were purchased last year, representing the sharpest decline of 21% compared to the previous year.

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.

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