Deep Stagnation Hits Real Estate Industry as New Apartment Sales Plummet Amid the War

The latest data from the Central Bureau of Statistics underscores the severe challenges faced by the real estate sector, pointing to a historic low in new apartment sales. In October, amidst the outbreak of war, a mere 930 new apartments were sold, with only 89 benefiting from government housing programs and discounted rates per resident.:

The figures, released by Dr. Shmuel Abramson, Chief Economist at the Ministry of Finance, align with the grim reality faced by the industry. These numbers mark a notable drop of 59.2% from the preceding month, where 2,278 apartments were sold in September. The situation is reminiscent of April 2020, during the initial COVID-19 lockdown, when a record low of 614 apartments were sold.

Surge in Unsold Inventory:

Compounding the issue is a historic surge in unsold apartment inventory. October witnessed a staggering 62,150 apartments remaining on the shelf, a 1.2% increase from September's already elevated figure of 61,353. This spike represents a 28% surge in unsold apartments within a year, up from 48,554 in October 2022.

Market Implications:

The data, derived from subtracting sold apartments reported to the Tax Authority from those permitted by contractors, highlights a concerning trend. With over 60,000 apartments under construction yet unsold, the market is bracing for a potential price drop in the near term. However, a reluctance among contractors to initiate new projects amid slow sales suggests a looming decrease in apartment supply in the coming years, potentially leading to increased prices when market conditions improve.

Regional Disparities:

More than 55% of the unsold apartments are concentrated in the Tel Aviv and Central Districts, with 30.2% (18,780 apartments) in Tel Aviv and 25.5% (15,870 apartments) in the Central District. Other regions affected include the Southern District (15.6%), Jerusalem District (10.7%), Haifa District (7.3%), and the North District (6.7%).

As the real estate market grapples with the aftermath of war and economic uncertainties, the significant drop in sales and the unprecedented rise in unsold inventory pose substantial challenges for the industry. The coming months may witness a delicate balance between a potential decrease in prices and the looming prospect of dwindling housing supply in the absence of renewed buyer confidence.