Israel home purchase cancellations spike as risky developer financing takes toll
Times of Israel · LC · trust 36/100
Zev Stub is the Times of Israel's Diaspora Affairs correspondent.
The number of canceled home purchases has spiked in recent months, rising 41 percent since the beginning of the year, according to the Finance Ministry’s most recent review of the housing sector.
The increase points to growing strains on the housing market as developers have aggressively promoted new developments with generous financing options.
In a number of cases, buyers were not required to put any money down when buying “on paper,” and fees for cancellations were waived or heavily discounted, senior deputy to the chief economist Galit Ben Naim commented on social media after the report’s release.
Israel’s housing market has slowed in recent years, with prices falling nearly 2% in the past year, partly in reaction to the multifront war Israel has been engaged in since Hamas invaded southern Israel on October 7, 2023. High interest rates, a record supply of unsold new housing, and high prices have also helped to tamp down sales.
In response, developers have taken to offering more attractive — and riskier — financing options to buyers, who have become more averse to buying homes due to the uncertainty of the situation. The trend became so pronounced in recent years that in March, the central bank stepped in and imposed restrictions on those packages, fearful of the increased risk to individuals and the entire banking system.
According to the Finance Ministry report, of the purchase deals signed between 2023-2025, a total of 1,821 had been canceled as of August 2026, with some 500 of those in the past seven months alone.
While contract terminations naturally increase as time elapses, the recent acceleration points to deeper structural factors, economists at the Finance Ministry noted.
Contracts signed during 2024 saw a particular jump in cancellations, the report noted, with 738 cancellations by August compared to 495 in January. This pushed the relative cancellation rate for 2024 deals from 1.5% to 2.3% — a 53% increase in relative frequency over just seven months. This corresponded with a period when building companies offered aggressive promotional financing schemes, including delayed payment structures, the report noted.
By comparison, the cancellation rate for 2023 deals grew by 18% over the same period, reaching 825 canceled contracts for a 4.3% overall cancellation rate.
More defaults may be reported in the future, the report noted. For housing units sold in 2024, only about 40% are ready for occupancy, and about a quarter specify delivery dates extending into 2028 or later, meaning that more cancellations are likely to materialize.
The trend stands in stark contrast to previous boom periods, the report noted. For deals signed in 2021, for example, the cancellation rate was just 0.5% two years after the end of that calendar year.
The rise in defaults is directly connected to the risky payment conditions required by developers, Ben Naim wrote on her personal Facebook page .
“Two sentences caught my eye when I was looking through the pile of cancellation agreements,” she wrote, quoting: “‘As the buyer has not paid anything for the apartment.. and as the buyer has informed the seller that he is unable to complete the purchase…'”
According to Ben Naim, half of all those who canceled never put up more than a few tens of thousands of shekels, and a third never actually put up any money.
“Set aside the fact that it is somewhat amusing to write about ‘completing’ the purchase when nothing has been paid,” she charged. “There is nothing funny about the fact that for many months, sometimes even more than a year after the purchase, in many transactions, one could pay nothing for an apartment.”
In addition, Ben Naim noted that while there is usually a cancellation fee of 10% of the apartment price, a sum that would typically reach hundreds of thousands of shekels, the penalty was discounted or completely waived in many cases. In the southern region, where the cancellation trend was most pronounced, the average penalty was just NIS 20,000 ($6,682), she wrote.
Separately, a report by the central Bureau of Statistics (CBS) last week showed that price disparities between different regions in Israel continue to grow.
The average home in Tel Aviv now sells for some 2.5 times the price of a residence in the northern and southern regions, CBS found.
Nationwide, the average transaction price reached NIS 2.435 million ($665,000) in the second quarter of 2026, CBS said.
The average sale price in Tel Aviv during the quarter was NIS 3.58 million ($1.2 million), compared to NIS 1.52 million in the north ($508,200) and NIS 1.66 million ($555,000) in the south, CBS reported. In Jerusalem, the average price was NIS 2.91 million ($973,000).
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