Contractor sales in Israel fell by 21% in February 2025 compared to the previous year, continuing the slowdown following the VAT increase. Central Israel saw the sharpest drop, with a 38% decline. In contrast, secondhand market transactions rose 17% year-over-year. Financing incentives played a major role in sustaining sales, especially in areas like Netanya and Ofakim. Overall, the real estate market remained sluggish, with minor variations between new and secondhand sectors, and a slight decrease in investor and first-time buyer activity compared to last year.

By Doron Breutman, Nadlan Center

Contractor sales of new apartments continue to stall, according to the February 2025 real estate market review published today (Wednesday) by the Chief Economist’s Department at the Ministry of Finance. In February, sales totaled 2,893 apartments—a 21% drop compared to the same period last year, and a minor 0.5% increase over January 2025. This marks one of the lowest new construction sales levels since January last year. Excluding government-subsidized sales, free market contractor sales totaled 2,155 units, down 20% year-over-year but up 11% compared to January.

Meanwhile, secondhand sales rose by about 17% in February compared to last year, reaching 4,523 units, although they fell 5% compared to January. It’s important to note that January 2025 saw particularly low free market contractor sales due to the rush to buy before the VAT hike in December 2024, and February sales may still reflect this trend.

A geographic breakdown based on real estate tax regions shows that the February sales decline compared to the previous year occurred in nearly all regions, except Hadera and Tiberias. The sharpest decline was in the Central region, with a 38% drop—only 276 free market apartments were sold there. In contrast, Be’er Sheva (including Sderot, Netivot, and Ofakim) led the market with 387 apartments sold.

In total, 7,416 apartments (new and secondhand) were purchased in February, including 738 subsidized apartments. This kept overall transaction levels relatively low, similar to January, following the exceptional spike in December 2024 before the VAT increase. Compared to February 2024, total transactions fell by 1%, and by 3% compared to January 2025. Excluding subsidized sales, free market transactions reached 6,678 units—a moderate 2% increase over February 2024 and no change compared to the previous month.

Financing Deals Peak in Netanya Region

Regarding apartment purchases with special financing deals, the Netanya tax region stood out, showing a consistent four-month rise in the share of apartments sold with financing incentives. From 28% of free market sales in November 2024, the share rose steadily to 55% in February 2025. In contrast, the Central region has seen a decrease in financing incentives since the December 2024 peak, though February’s 40% remains high. In the Tel Aviv region (including Tel Aviv and Bat Yam), the February rate stood at 27%, similar to the previous month and lower than December.

An initial analysis by the Ministry of Finance, examining financing incentives by city, highlights Ofakim. Between November 2024 and February 2025, 59% of the approximately 300 new free-market apartments sold in Ofakim included a financing incentive, compared to 33%-50% in the southern region overall. A more detailed breakdown will be provided in the next review.

Investor purchases totaled 1,105 apartments in February, a 3% decrease from February 2024 and an 8% drop compared to January. Investors accounted for 15% of all transactions, similar to last year but slightly lower than the previous month. Investor sales reached 1,344 apartments, a 6% year-over-year increase and a slight decline of less than 1% compared to January.

First-time homebuyer purchases totaled 4,107 apartments in February, including subsidized units, down 4% compared to February 2024 and 2% from January. Excluding subsidized units, first-time buyer purchases reached 3,369 apartments, a modest 1% increase over February 2024 and a 4% increase over the previous month.