Market analysis · Second quarter 2026
Market analysis · Second quarter 2026
Prices fell, sales held, and the two halves of the market stopped moving together
Israeli apartment prices ended the second quarter about one and a half per cent below where they were a year earlier. That single number hides almost everything that actually happened between April and June — a four-and-a-half point spread between districts, new-build sales up eighteen per cent while second-hand sales fell eleven, and building costs still climbing while the asset they produce gets cheaper.
The number itself
There is no single Q2 price figure, and anyone who quotes one is rounding something off
The Central Bureau of Statistics does not publish a quarterly house price number. It publishes a rolling index that compares transactions in two months against transactions in the two months before, released roughly six weeks in arrears. Three of those readings touch the second quarter, and they were published on 15 June, 15 July and 14 August.
They read: −0.3% for March–April, −1.0% for April–May, and +0.1% for May–June.
You cannot multiply those three readings together to get a quarterly figure.
Each window overlaps the next by a full month, so April is counted twice and May three times. Compounding them produces roughly −1.2%, which is arithmetic rather than a fact about the market. It is a common mistake in Israeli property commentary and it always exaggerates the move.
The honest quarterly proxy is the twelve-month comparison, which does not overlap itself. Across the three Q2 readings it ran −1.3%, then −2.0%, then −1.5%. So the year-on-year decline deepened through the middle of the quarter and then eased. Prices are drifting down at somewhere between one and two per cent a year, which after five years in which the index rose about a third is a stall, not a correction.
Two other things are worth holding in mind before reading any of this too confidently. The figures are provisional — transactions reported late to the Tax Authority revise them, usually by a tenth or two. And the start of the quarter sat in the shadow of the March–April confrontation with Iran, which the Bank of Israel says produced a sharp fall in activity that the economy then spent the rest of the quarter recovering from. April was not a normal month.
Where it happened
The national figure is an average of six markets that are no longer doing the same thing
Take the mid-quarter annual reading — April–May 2026 against April–May 2025 — and the national −2.0% breaks into a spread of 4.6 percentage points. The Centre district was down 3.2% on the year. The North was up 1.4%.
The month-to-month district numbers are noisier still, and they invert. In the May–June reading Jerusalem was up 1.8% and Haifa up 1.5%, while the Centre was down 1.0% and Tel Aviv down 0.7% — roughly the reverse of what those same districts had done a month earlier. District-level readings sit on far fewer transactions than the national index, so a couple of unusual buildings can move them. Treat the annual figures as signal and the two-month district swings as weather.
What survives both is the direction. The Centre and Tel Aviv — the two most expensive districts, and the two carrying the most unsold new stock — are where the falls are concentrated. The periphery is flat to rising.
What actually traded
Total sales barely moved. What was being sold changed completely
About 22,640 apartments changed hands in April–June, 0.6% fewer than in the first quarter, or 14.9% more once the CBS adjusts for seasonality. On the face of it, a quiet quarter. Underneath, the composition moved hard in one direction.
New-build sales rose 18.4% on the quarter, to about 9,670. Second-hand sales fell 11.3%, to about 12,970. New build took 42.7% of the market, against roughly a third a year ago. Tel Aviv district sold 2,302 new apartments, up 49.9% in three months; Tel Aviv-Yafo itself sold 1,236, up 50.7%. Ashdod went from 145 new-build sales to 509.
This is not the same thing as a recovering market, and it is worth being precise about why. Second-hand sellers fell in every district — Jerusalem down 20.3%, Haifa 14%, Tel Aviv 12.6%. A private seller cannot offer you 20/80 terms, cannot absorb your index linkage, and cannot subsidise your mortgage. Developers sitting on unsold stock can do all three, and in the second quarter they did. Roughly a third of new-build sales — 32.7% — went through government subsidy schemes, and in the price index the subsidised share of new transactions rose again, from 36.4% to 38.4%.
Strip the government support out and the new-build price series has been falling, not rising.
The CBS ran exactly that test earlier in the year: new-build prices up 0.4% on the headline, down 0.3% once transactions with government support were excluded. Over the year to April–May, new-build prices were down 3.9% — roughly double the fall in the market as a whole.
The overhang
Eighty-four thousand new apartments are still waiting for a buyer
The stock stood at about 84,280 unsold new apartments at the end of June, against roughly 85,300 in March and around 65,000 in April 2024. After three and a half years of the pile growing at about 1.4% a month, it has been broadly flat since the turn of the year. Months of supply improved to 26, from 28.9 at the end of May — which is what the strong new-build quarter bought.
Where it sits matters more than the total. Tel Aviv district holds 30.2% of the national overhang and the Centre another 24.4%: more than half the unsold stock is in the two districts buyers most want to be in, and those are the two districts where prices fell hardest over the year. Among the large cities, Jerusalem has about 10,320 unsold new apartments and Tel Aviv-Yafo about 9,550. Outside them, the concentrations are striking for the size of the towns — Lod around 3,050, Kiryat Gat 2,610, Yehud-Monosson 1,810, Be'er Ya'akov 1,570, Ramat HaSharon 1,510, Ra'anana 1,500.
Two years of supply is the number that explains the incentives. A developer carrying finance on unsold stock has a monthly cost of waiting, and discounting is usually cheaper than waiting. That is the mechanism behind the payment terms currently on offer — not generosity, and not confidence.
The squeeze
Costs are rising into falling prices, and the gap is now about five points
The construction inputs index rose 0.2% in June and 3.7% over the year. Almost all of that is labour: site wages were up 5.5%, and stripped of wages the index did not move at all in June. Concrete actually fell. So the cost pressure in Israeli construction right now is people, not materials, and it is not obviously about to ease.
Meanwhile the thing being built is 1.5% cheaper than a year ago, and if it is a new-build apartment, 3.9% cheaper. Developers are absorbing a squeeze of roughly five percentage points a year between what they pay and what they can charge. Everything else in this quarter's data — the financing promotions, the subsidised share, the rise in cancellations of purchases from developers — follows from that one gap.
For anyone buying off-plan, that scissors chart is not background. It is your contract.
Payments on an off-plan purchase are linked to the construction inputs index. On a contract signed since 7 July 2022, at least 20% is payable at signing without linkage and only half of each further payment may be linked, so the practical ceiling on linked exposure is about 40% of the price. On a ₪2.5m apartment that is around ₪1m riding an index rising 3.7% a year, while the asset itself is drifting down. Worth knowing before the payment schedule is agreed, not after.
Money
Only one rate cut landed inside the quarter — and the one everyone talks about did not
The Bank of Israel began easing in November 2025 and has cut four times since. Inside the second quarter itself there was exactly one move: late May, from 4.00% to 3.75%. Two of the quarter's three months transacted at 4.00%.
The cut to 3.50% came on 6 July, after the quarter closed, taking prime to 5%. It appears in none of the figures above. Anyone reading the June uptick as the rate cuts working is a quarter early — the July move will first show up in the August–September index, published in November.
The Bank's own forecast, published alongside the July decision, has inflation at 1.8% for 2026 and the policy rate averaging 3% by the second quarter of 2027, implying two more cuts. Growth was revised up to 4% for 2026. If that path holds, the affordability picture improves gradually through 2027 — but gradually is the operative word, and a hundred basis points spread over eighteen months does not move an asset price much on its own.
| Reading | Period covered | Published | Two-month | Annual |
|---|---|---|---|---|
| Q1 close | February–March 2026 | 15 May 2026 | +0.4% | −1.2% |
| Q2 first | March–April 2026 | 15 June 2026 | −0.3% | −1.3% |
| Q2 middle | April–May 2026 | 15 July 2026 | −1.0% | −2.0% |
| Q2 close | May–June 2026 | 14 August 2026 | +0.1% | −1.5% |
All CBS price readings are provisional and subject to revision as late transactions are reported.
What a buyer should take from it
Six conclusions that follow from the data, and one that does not
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This is a stall, not a crash
One to two per cent a year, after a third of a decade's gains, against inflation of 1.6%. In real terms it is a slow deflation of about three per cent a year. Anyone waiting for a 20% correction is waiting on something the data does not currently point at.
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Negotiating power is real, and it is unevenly distributed
It sits where the unsold stock sits: Tel Aviv district, the Centre, and a handful of towns carrying more inventory than their size suggests. It is much weaker in the North and in Jerusalem, where prices held or rose.
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The best terms are on new build, and terms are not the same as price
A 20/80 structure with the developer carrying the linkage is worth real money. A headline discount on a price that was set optimistically is worth less. Compare against what has actually transacted in the building, not against the price list.
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Second-hand is where the quiet opportunities are
Sales fell in every district, which means private sellers are meeting fewer buyers than at any point this year. A seller who has already committed to moving has a problem that a developer with 84,000 units of company does not.
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Off-plan linkage is a live cost, not a footnote
Build costs are rising 3.7% a year into prices falling 1.5%. If you are signing a payment schedule, the split between linked and unlinked payments is worth more attention than the kitchen specification.
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The rate cuts are not in these numbers yet
Only one landed inside the quarter. The July cut to 3.50% first appears in data published in November. If cheaper money is going to put a floor under prices, Q2 is too early to see it.
The conclusion that does not follow: that the strong new-build quarter marks the turn. The CBS says so itself — new-build sales have risen an average of 2.7% a month since January while second-hand has fallen 0.4% a month since April, and it is too early to call that a reversal rather than a transfer between the two halves of the same market. One quarter of subsidised, incentivised new-build sales is not a recovery until the second-hand market joins it.
Sources and method
- Apartment price index, and new-build index: Central Bureau of Statistics releases of 15 May, 15 June, 15 July and 14 August 2026. Index covers new and second-hand transactions across 67 localities in nine areas, drawn from Tax Authority records rather than survey. All readings provisional.
- Transaction volumes, district and city breakdowns, and unsold stock: CBS release of 13 August 2026 covering the second quarter and stock at 30 June 2026.
- Construction inputs index and wage component: CBS price-of-inputs release for June 2026 (base July 2025 = 100), with the July 2026 reading noted where relevant.
- Policy rate, macroeconomic forecast and the assessment of March–April activity: Bank of Israel Monetary Committee decision and accompanying forecast, 6 July 2026.
- Monthly purchaser breakdowns and subsidy shares: Ministry of Finance, Chief Economist, residential real estate reviews for the relevant months.
- Q1 volume figures in Figure 3 are derived from the published quarter-on-quarter percentage changes and rounded; they are not separately published in that form.
General market commentary, not legal, tax or investment advice, and not a recommendation to buy or sell any particular property. Figures are current at 20 August 2026 and will be revised.
This index publishes data and takes no money from anyone it writes about. No advertising, no paid placement, no sponsored entries, and no referral or introduction fee from any agent, developer, bank, lawyer, surveyor or mortgage broker. It is not a licensed brokerage, it holds no listings, and no property is sold through it.
One quarter is not your street
A national figure is six markets averaged, and yours is one street
Send us the street, the price you have been quoted and the stage you are at, and we will tell you what the recorded transactions on it look like. We are not selling you the apartment and we are not paid by anyone who is.