Sharp Decline in Building Permits and Completions Despite Annual Growth in Construction Starts

Israel’s construction sector saw 17,318 new housing starts in the first quarter of 2025, marking a 12% decrease compared to the previous quarter, but a 6.5% increase year-over-year, according to new data from the Central Bureau of Statistics (CBS).

The positive year-over-year change reflects recovery from early 2024’s severe labor shortages. However, the first quarter of 2025 still suffered from a shortage of construction workers, due to the slow pace of recruiting foreign labor and the continued absence of Palestinian workers, creating significant delays across the sector.

Building Permits Plummet Nearly 35% in Q1 2025

One of the most concerning trends in the CBS report is a dramatic 34.9% decline in building permits, which totaled approximately 17,000 in the first quarter of 2025. This steep drop is a leading indicator of a future slowdown in 

The number of completed apartments fell to 12,018 units in Q1 2025 — a 22% decrease from the previous quarter and 9% below the same period in 2024. This decline is a more direct reflection of construction delays and longer project timelines, due to the ongoing labor shortage.

At the same time, the number of apartments under active construction reached a record high of 188,811 units, up 8.6% compared to the same period last year. While this indicates strong demand and ongoing development, the growing backlog highlights the bottlenecks in workforce and resources.

The delays in project completion are translating into legal action, with thousands of apartment buyers suing developers for missing contractual handover deadlines. Despite repeated calls, contractors’ demands for government intervention in resolving these disputes have gone unanswered so far.

The CBS report also paints a worrying picture for urban renewal projects, particularly evacuation-construction (Pinui-Binui) programs, where the shortage of labor is even more pronounced.

In Q1 2025, only 3,448 apartments began construction under demolition-rebuild initiatives — a 27.5% drop from the same period last year. Meanwhile, 1,273 apartments were demolished as part of these renewal efforts, highlighting the sector’s limited contribution to overall construction growth.

Annual Construction Starts Up 6%

While quarterly figures reveal a downward trend, the annual summary from April 2024 to March 2025 offers some optimism. Total construction starts during this period increased by 6% compared to the previous year, reaching approximately 67,800 apartments.

After accounting for units demolished through urban renewal, net new starts totaled 62,700 units, a 7% annual increase — suggesting that despite immediate challenges, long-term momentum in the housing market remains intact.