Are prices about to drop?
Today’s data released by the Central Bureau of Statistics suggests that while demand for new and used apartments continues to decline steadily, the supply side is also stagnant, with construction starts falling significantly. There is. The number of condominium transactions in October was down 54% compared to the same month last year, indicating a worrying trend.
According to the report from October 2022 to September 2023, only 61,620 apartments began construction, a decrease of 14.4% from the previous year. Net construction starts, excluding demolished apartments, amounted to about 57,650 units, accounting for only 93.6% of the apartments added to the economy.
It is important to note that these figures do not fully reflect the impact of the recent war, which has further slowed the construction industry since October 7th.
Which cities have seen the largest increase in new construction starts?
Geographically, about half of the new construction starts were in the Central and Tel Aviv regions, accounting for 24.3% and 22.9%, respectively. The top 5 cities are Tel Aviv – Jaffa (5,907). Jerusalem (4,012); Batyam (2,548); Ashkelon (2,082); and Rod (1,999). Other notable cities that saw an increase in construction starts compared to the previous year include Lod, Nazareth, Ra’ana, Kiryat Ghat, Haifa, Tel Aviv-Jaffa, and Ramat Hasharon.
The report also highlights cities that saw positive growth in construction starts after a decline in the previous year. These cities include Tiberias, Netivot, Herzliya, Aphra, Or Yehuda, Nahariya, and Hadera.
As of September 2023, there were approximately 173,000 apartment units under construction, half of which were in the Tel Aviv and Central districts, and 7.5% in the Haifa district.
Commenting on the report, Avi Zitoni, president of the Tel Aviv and Central District Contractors and Builders Association, expressed concern about the continued decline in construction starts. He emphasized the need for the government to take responsibility and aim for 80,000 to 100,000 construction starts per year to close the supply-demand gap.
Tsachi Sufrin, vice-chairman of the board of directors and controlling shareholder of the Sufrin Group, acknowledged that construction starts are declining nationwide, but demand is expected to increase further away from conflict zones. He predicted that the number would rise, emphasizing Tel Aviv’s position as a major city.
He also called for swift government action to address challenges facing the construction industry, including a labor shortage.
Chaim Feiglin, CEO of Zemacher Hamelmann and vice-president of the builders’ association, pointed to the surprising number of construction starts in the third quarter, which was 2-3. He pointed out that this was due to a project started a year ago. He also highlighted the impact of stable interest rates on construction starts, suggesting that entrepreneurs’ optimism and the possibility of lower interest rates could lead to a market recovery.
Rakhfat Rahab, vice president of marketing and sales at Almog Group, emphasized the importance of construction starts in Ashkelon despite the overall year-on-year decline. He expressed confidence in the recovery of buyer demand after the end of the Gaza conflict, noting that sufficient supply on the market could help prevent sharp price increases.
The current state of the Israeli real estate market shows that both demand and supply are decreasing. Governments and industry stakeholders must work together to address the challenges facing the construction sector and ensure a balanced market that meets the nation’s housing needs.