Israel is building homes at a record pace. So why aren’t prices falling faster?

Official data shows an all-time high of more than 85,000 new homes for sale in Israel, about 55% of them in Tel Aviv and the central region, yet prices have fallen only 1.8% over the past year and remain near record highs after a 230% rise since 2007. Economists and agents debate how reliable the inventory figures are and whether the 20-year run is ending.

Israel is building more housing than ever, with an all-time high of more than 85,000 new homes available for sale in various stages of construction, according to Central Bureau of Statistics data. About 46,000 of those units, some 55%, are in Tel Aviv and the central region, and 10,000, about 12%, are in Jerusalem. At the current pace of market activity, selling all of them would take about two and a half years. Prices have nonetheless fallen only 1.8% over the past year and remain near record levels, after climbing some 230% since 2007. The article sets out to explain the contradiction between record supply and stubbornly high prices, citing a long-standing land shortage, bureaucratic delays in construction pipelines and rapid population growth. Dani Ben Shahar, head of Tel Aviv University's Alrov Institute for Real Estate Research, cautions that the inventory figures need qualification. "Those numbers need to be taken with a grain of salt," he says, noting open questions about how the CBS measures units and at what stage of development they are counted. Much of the inventory is in early construction stages and may not be habitable for years. Jerusalem agent Nachi Paris argues that waiting for a better deal has historically backfired, saying buyers who held off ended up paying more three years later. The article also lists a strong shekel and high borrowing costs among the forces weighing on the market.