Drama in the housing market: New apartment prices rise by 0.9%

Data for April-May showed a 1% decrease in housing prices. Contrary to predictions that this would primarily impact new construction, the decline was most pronounced in the secondary market. Selling second-hand apartments is challenging, as sellers lack the financial incentives provided by contractors, and buyers are increasingly aggressive in negotiating lower prices.

The previous month's price drop was largely driven by a 2.3% decline in Tel Aviv. However, May-June data indicates a market correction. While Tel Aviv prices fell by another 0.7%, national apartment prices returned to a 0.1% increase, with new apartment prices (excluding subsidized units) jumping by 0.9%.

This rebound is attributed to buyers returning to the market following interest rate cuts and a clear preference for properties featuring a protected space (Mamad). Conversely, secondary market prices continue to fall, particularly for units lacking a Mamad, which are often sold at 10–15% discounts.

The average price of an apartment in Israel has crossed the 2.4 million shekel threshold for the first time, marking a 3.7% increase, largely influenced by a surge in luxury property transactions. Even when including subsidized units—which accounted for 38.4% of transactions compared to 36.4% in the previous period—new apartment prices still rose by 0.5%.

Regionally, prices rose by 1.8% in Jerusalem and 1.5% in Haifa.

Israel Builders Association President Roni Brik stated:

"The continued rise in rental prices is a direct result of a severe shortage of rental units, worsened by the government distancing private investors from the market. It is impossible to reduce supply and expect rents not to rise. The government must bring investors back and create real solutions for rental housing."

While the new apartment market currently favors buyers with increased seller flexibility, recent data suggests a return of demand, which may close this window of opportunity sooner than expected.