Almost 7% of deals cancelled: Why are apartment buyers in the south breaking first?
The south was a key region for 10/90 and 20/80 financing campaigns, allowing buyers to enter the market with low initial capital. As large payments fall due, the combination of high interest rates, repayment capacity issues, and eroding apartment prices in some projects is forcing a recalculation. In the Beersheba area, the cancellation rate for 2023 deals approached 7%, significantly higher than the national average.
The figure that about 475 out of 1,821 cancelled deals are in the Beersheba area is only part of the picture. In the Negev, a large volume of new apartment deals has been executed in recent years, making a relatively high number of cancellations natural. However, the more interesting metric is the cancellation rate relative to signed deals. For 2023 contracts, the cancellation rate in the Beersheba area reached approximately 6.5%–7%, compared to 3.6%–4% nationwide and about 2.3% in the Tel Aviv area.
Why the South?
The first explanation lies in financing campaigns. In recent years, the south became a hub for 20/80, 10/90, and similar models. Contractors required a relatively small sum at signing, with the bulk of the payment due near handover. For a 1.4 million NIS apartment, a 15/85 deal requires about 210,000 NIS upfront, leaving almost 1.2 million NIS for later. For households with limited equity, this was a way to enter the market early and delay the large mortgage burden by two or three years.
This delay was central to the deal's appeal, but it also postponed the real ability test. When the handover date arrives, banks check income, liabilities, and equity. Since mortgage interest rates are significantly higher than during the pre-hike period, the same loan now generates a much higher monthly repayment. In the south, this is particularly significant: while apartment prices are lower than in Gush Dan, wage levels and buyer equity are also lower.
Price Erosion and Market Dynamics
A second, perhaps more compelling factor, is the apartment price. Buyers who signed in 2023 or 2024 did so when expectations were high. Since then, sales have weakened, inventory has grown, and deeper discounts and benefits have appeared in some projects. If a family signed for an apartment at 1.55 million NIS and two years later finds a similar one offered at 1.4 million NIS, even a cancellation penalty of tens of thousands of shekels can become part of a rational calculation.
The problem is compounded when the appraiser's valuation is lower than the contract price. Banks calculate financing based on the property value they recognize. If the contract price is 1.55 million NIS but the appraiser values it at 1.4 million NIS, the buyer may be required to provide additional equity exactly when they are already struggling to complete the deal.
How much does it cost to cancel a 20/80 deal?
Cancelling a purchase can be expensive. Many contracts set an agreed compensation of about 10% of the apartment price for breach of contract. For a 1.5 million NIS apartment, this is about 150,000 NIS; for a 2 million NIS deal, it is about 200,000 NIS.
In practice, the amount can be significantly lower. A review of cancelled deals in the south showed that the average compensation paid by buyers was about 20,000 NIS. Some developers waive the compensation or settle for a partial amount to return the apartment to the market quickly. However, in expensive deals in Tel Aviv, amounts approaching half a million NIS have been recorded. The gap stems mainly from negotiations with the developer and the stage of the deal.
