Mysteries in the Israeli Residential Real Estate Market

By Daniel Kupervaser, Herzliya

Analysis and assessments of the Israeli residential real estate market have taken center stage in recent years within economic discourse among experts and in the national press. Every newspaper, television program, and internet portal dealing with the Israeli economy dedicates a special section to this market. A vast amount of data is disseminated through these channels, the vast majority of which originates from government institutions such as the Central Bureau of Statistics (CBS), the Chief Economist at the Ministry of Finance, and the Tax Authority.

Despite the abundance of information presented to the public, several "black holes" and ambiguities seem to arise, making it difficult to understand the full picture and the processes at play. These are mysteries worth addressing.

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1. The Mystery of Measuring Annual Real Estate Activity

Every month, the CBS and the Chief Economist at the Ministry of Finance publish data on the volume of residential real estate transactions to reflect trends and periodic fluctuations.

The Reported Picture for 2025:

• Second-hand apartment purchases: 56,000
• New apartment purchases (Free Market): 24,000
• New apartment purchases (Government Subsidized): 10,000
• Total transactions reported to the public: 90,000

This figure is only partial and does not faithfully reflect all instances of new ownership acquisition. Common reports overlook a large segment of residential construction by landowners with building rights who realize those rights without intending to put the new properties up for sale.

This includes private projects for long-term rentals, self-builds, purchasing groups, and the landowner's share in combination transactions. It is estimated that this accounts for approximately 22,000 apartments per year. Consequently, the annual volume of activity has been an average of 25% higher than published reports.

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2. The Mystery of Unsold New Apartment Inventory

There is a consensus that the market has entered a period of prolonged oversupply. A preferred metric for this is the growth in the inventory of unsold new apartments held by contractors.

• December 31, 2024: The CBS reported 76,508 unsold new apartments.
• December 31, 2025: This figure grew to 86,095.
• Reported Growth: 9,587 apartments were added to the inventory in 2025.

However, other CBS figures cast doubt on this data:

• In 2025, contractors began building 56,194 apartments intended for sale.
• During the same year, they sold 34,500 new apartments.

Simple arithmetic suggests the inventory should have grown by 21,694 units. This leaves a discrepancy: Where did the 12,107 apartments go that began construction but were never reported as sold?

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3. The Mystery of Real Estate Investors

The Chief Economist reported that in 2025, investors bought approximately 13,000 apartments and sold about 15,000—a net reduction of 2,000 units.

However, a CBS report titled "Apartment Ownership, 2013-2025" shows that the total number of apartments grew by 56,000 in 2025. The discrepancy lies here: the CBS reports that of those 56,000 additional apartments, 40,000 were occupied by renters and only 16,000 by owners.

Conclusion: The Chief Economist's report is radically incomplete regarding investor activity, largely due to a failure to account for activity within "not-for-sale" construction projects.

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4. The Mystery of the Source of the Current Crisis

Analysts often point to high interest rates, buyer expectations for price drops, or the state of war as the cause of the current crisis. However, these variables usually only affect the Israeli market in the short term.

The majority of purchases in Israel are driven by the basic need for a roof over one's head. To maintain balance, demographic growth is the primary driver of new construction.

Starting in June 2023, a demographic shift occurred: population growth, which previously ranged from 180,000 to 220,000 per year, has leveled off at approximately 120,000. Meanwhile, net housing starts have stabilized at over 70,000 annually. Based on the standard ratio of 3.1–3.2 people per apartment, this represents nearly double the need dictated by current population growth. This oversupply is now the primary driver of the market crisis.