The Question of Questions: Why Are Apartment Prices Not Falling?
Despite falling transaction volumes and record-high housing supply, apartment prices are not showing a sharp decline. Experts attribute this to hidden discounts, developer financing constraints, and resilient baseline demand.
"Despite the prevailing feeling of stagnation in the housing market, in practice the data points to a much more complex reality," claims Ohad Danos, a real estate appraiser and expert, who previously served as chairman of the Chamber of Real Estate Appraisers. According to him, the volume of transactions has decreased significantly compared to peak years, but prices are not dropping significantly and are even continuing to rise in some areas.
This phenomenon is particularly prominent in the current period, where the economy is dealing with security uncertainty, but the housing market is still demonstrating surprising resilience. For example, last March, a month that took place against the backdrop of war, about 6,600 real estate transactions were carried out in Israel. Although this is a lower level compared to particularly strong years, for a month of war, the volume of transactions indicates that the market has not stopped completely.
Danos continues: "Looking at the big picture, in 2025 as a whole, about 85 thousand apartments were sold in the country. The market is not in deep stagnation, but in a decline of about 25% compared to peak periods. This is a significant slowdown, but not a collapse. The main explanation for why prices are not dropping lies in the identity of the buyers who have remained active in the market. Those who are buying apartments today are mainly those who must: families who need a housing upgrade, couples who require a housing solution, or investors with available capital. There are fewer 'speculative' purchases and more purchases out of real need or high economic ability."
Hidden Trends and Data
Danos produces a price review every quarter, which recently pointed to a larger price drop than that of the CBS (Central Bureau of Statistics). According to his review covering 17 cities, in the first quarter of 2026, an average price drop of 1.2% was recorded compared to the previous quarter and a drop of 1.6% compared to the corresponding quarter of 2025.
In some cities, the drop was more significant: 14% in Modiin (compared to the corresponding quarter), 9% in Rishon LeZion, and 8% in Netanya. At the same time, there were cities that recorded increases, indicating a mixed trend.
Why are developers not lowering prices?
According to Danos, developers are not rushing to lower prices, not only out of a desire to maintain profitability, but also due to financing limitations. The costs of land, raw materials, taxes, and high interest rates make it difficult for contractors to lower the price sharply without damaging the economic structure of the project. Lending banks often limit significant price drops, as this could affect the collateral value of the entire project.
Instead of across-the-board price drops, the market sees mainly financing promotions, benefits, and more convenient payment terms. Contractors prefer to allow payment installments or contractor loans rather than officially reducing the list price.
Haim Feiglin, Deputy President of the Israel Builders Association, adds: "A residential apartment is not a perishable shelf product. Following the war events, construction costs have increased significantly by about 30% beyond the building input index. A significant reduction in the prices of apartments under construction endangers the builders and the financing parties."
Market Perspective: Discounts "Under the Radar"
Yaakov Nitzan, CEO of Ruby Capital, believes the official CBS index does not reflect reality: "Financing promotions and contractor loans embody a real price drop of 8% to 14%. Developers will not sell at a loss, but this is a buyer's market where developers are willing to provide significant benefits."
Asaf Livnat, CEO of a real estate investment house, agrees: "Phoenix Group's data shows that almost 40% of transactions include benefits, reflecting an average real discount of about 12.7%. Contractors prefer to cut prices 'under the radar' to avoid lowering the public list price."
Ofra Hadad, Deputy CEO of Euro Israel, offers advice to buyers: "The key lies with those who have liquid money. Offering the contractor 25-40% payment at the time of signing the contract saves them the high interest rates paid to banks. In such a situation, the contractor will be happy to pass the savings directly to the buyers in the form of a real discount on the apartment price."
