In the opening month of 2025, Israel’s housing market witnessed a significant downturn, with only 7,619 apartments sold, marking one of the lowest January figures over the past decade. This decline reflects broader economic trends and specific policy impacts, including government subsidies and VAT adjustments. Home sales decreased by 5% compared to January 2024, while transactions plummeted by 32% from December 2024, when buyers rushed to finalize deals ahead of a VAT increase. The data also reveals that excluding subsidized units, open-market sales dropped by 6% year-on-year and 32% from December.

A Downturn Across Multiple Segments

During the cold days of early 2025, the Israeli real estate sector experienced an unprecedented slowdown. Key locations such as Tel Aviv and Hadera saw substantial drops in developer-financed transactions, although these remained relatively high compared to previous months. In Hadera, financing deals accounted for half of all developer sales, whereas in Tel Aviv, they made up a quarter. Notably, in Israel’s central region and Be’er Sheva, financing deals held steady at 44% and 40%, respectively. Resale activity, however, showed some resilience, increasing by 9% compared to January 2024, though it remained among the weakest months since the turn of the millennium.

Investor purchases reached 1,196 units, showing a slight annual increase but a sharp monthly decline of 37%. First-time buyers, crucial to the market's vitality, acquired 4,340 apartments, including subsidized units, indicating a 6% drop from the same period last year. Move-up buyers also faced challenges, purchasing 8% fewer homes than in January 2024. A notable trend emerged with homeowners opting to downsize their properties.

The cash flow situation for developers worsened significantly. Actual developer cash flow from new home sales amounted to NIS 3.5 billion ($970 million) in January, far below the potential NIS 6.3 billion ($1.75 billion). This represents a 31% real decline from January 2024 and a steep 78% drop from December. For the first time in nearly a year, developers recorded negative net cash flow after input deductions.

Perspective and Implications

From a journalist's perspective, this report underscores the intricate relationship between government policies, economic conditions, and consumer behavior in shaping the housing market. The dramatic fluctuations highlight the need for more stable and predictable fiscal measures to avoid sudden surges or slumps in property transactions. Furthermore, the growing reliance on developer financing suggests that affordability remains a pressing issue for many potential buyers. Policymakers must carefully consider these dynamics to foster a healthier, more sustainable housing market in Israel.