The war on Gaza led to an increase in the housing price index in Israel by 3.6% between November 2023 and March 2024, after declining by 2.5% in the ten months preceding this period, according to data from the Israeli Bureau of Statistics, part of which was quoted by the Israeli economic newspaper Globes.
The average price of an apartment in Israel in the first quarter of 2024 reached 2.23 million shekels ($539,000), after a state of decline that hit the market in the first three quarters of 2023.
Popularity of new apartments
The number of residential real estate transactions carried out in the first three quarters of 2023 reached about 6,000 homes per month, according to data from the Israeli Central Bureau of Statistics, which is a low level that Israel has not witnessed during at least the past 20 years.
Promotions offered by developers since interest began to rise have halted the slowdown in the market for new apartments, while purchases of previously occupied (used) apartments continued to decline, and transaction prices for new apartments began to rise.
According to the newspaper, if the average price of a new apartment in the first quarter of 2023 reached 2.07 million shekels ($550,000), then in the second and third quarters it exceeded 2.1 million shekels ($558,000).
The newspaper pointed out that since November of last year everything has changed. Price indicators have risen, as have average transaction prices, and it clearly appeared that it was not the promotions that changed this trend, but rather the war on Gaza.
Impact of war
The war on Gaza has directly contributed to the proportion of new apartments purchased currently reaching about half of the total transactions in the market out of the total market, for the first time since the Covid-19 pandemic in 2020, when the motivation to purchase new apartments was the need to work from home and additional space. Needed larger and more spacious apartments that would make it easier to stay at home during long periods of lockdown.
During the war, the need for safe shelters in homes increased significantly, and this could only be provided by new and used apartments built in the last 20 years, as the housing built in the 1990s was smaller in size and did not meet security needs.
The number of new apartments purchased in the first quarter of this year in the market jumped 40%, while in used apartments the number of apartments purchased increased by only 6%.
This reflects the demand of apartment buyers for buying used apartments that are relatively recently built, and the increasing difficulty that owners of old apartments face in selling them.
Labor crisis
From another angle, the head of the Israel Builders Association, Raul Srugo, recently told the Knesset Finance Committee that today there is already a delay in the delivery of new apartments for a period of up to 6 months, as the government is unable to formulate effective solutions to bring in foreign workers to ensure that the backlog of work does not increase in The near future, and those who buy a new apartment will have a better idea of when it will be completed.
It is noteworthy that Israel has been preventing the entry of Palestinian construction workers since it began its war on the Gaza Strip on October 7 last year.
