Unprecedented Real Estate Crisis Strikes Israel: 82,000 Units Without Buyers

SadaNews Economy - The residential real estate market in Israel is experiencing an unprecedented stagnation for decades, amid continued decline in sales and increasing financial deficits among real estate development companies, according to a report by the credit rating agency "Standard & Poor's Maalot".

According to the Israeli newspaper "Globes", the report indicated that new home sales dropped by 28% during the first seven months of 2025 compared to the same period last year, due to a significant rise in interest rates and the tightening imposed by the Bank of Israel on promotional campaigns.

In contrast, the stock of unsold units rose to 82,000 by the end of July, a record level that reflects stagnant demand and a backlog of supply.

The report noted that financing and construction costs continue to rise, with building input prices increasing by about 5% over the year due to the absence of Palestinian labor. It also warned that developers are facing severe erosion in profits due to higher interest rates and reduced down payments from buyers.

The agency added that home prices have decreased by more than 2% between June and August, confirming that the actual decline is "deeper than what the indicators show" after accounting for offers and discounts provided by developers to clear inventory.

The report believes that the crisis will persist until at least the second half of 2026, with more bankruptcies likely among debt-laden companies. While a limited improvement is expected if interest rates are reduced in the future, the overall outlook remains bleak, as the market is headed towards an extended recession and a loss of investor confidence.