Rising interest rates failed to lower real estate prices in Israel. Young families have not given up on buying a home, even though the price of an average apartment in the country reached a record 1.92 million shekels ($552,000) in October, a nearly 20-percent increase over the past 12 months, according to the Central Bureau of Statistics (CBS).
Young couples, who represent first-time buyers, now prefer to get apartments away from the center of the country, mostly on the open market, rather than through governmental programs.
As a result, most homes were purchased in the southern region in the third quarter of 2022: 3,800 house sales in this area, compared to 3,600 in central Israel out of a total of 16,500 homes purchased between July and September, according to the CBS.
Housing purchases in the Tel Aviv area fell by 40% in the third quarter of 2022 compared to the same period in 2021.
The highest number of homes purchased in the third quarter was recorded in Jerusalem (1,123), followed by Be’er Sheva (1,012) and Haifa (833). In Tel Aviv, only 365 sales were completed, the lowest figure in five years, as buyers could no longer afford the city's prices.
Israelis mainly buy 3-4 room apartments suitable for families. The average price for a four-room apartment reached NIS 1.93 million ($555,000.) The average price of a three-room apartment is 1.43 million shekels ($411,000.)
The rise in housing prices was tempered, even in Tel Aviv. The average price of an apartment with 4-5 rooms purchased in Tel Aviv in the third quarter of 2022 was 10-15 percent lower than that in the previous quarter.
However, the average price of an apartment bought in Tel Aviv in the third quarter still increased by 1.1 percent compared to the previous quarter due to sales of three-room apartments.
Decreases were also recorded in Jerusalem, Be’er Sheva, Netanya, Rishon Lezion and Beit Shemesh. These declines could indicate that prices may start to fall, especially as mortgage interest rates are expected to continue to rise.