New Apartment Sales in Tel Aviv District on the Decline as Supply Surges
According to data released today by the Central Bureau of Statistics, the sale of new apartments has been struggling for the past four years, with the number of unsold apartments reaching about 60,000 – equivalent to a year’s worth of construction starts. This surplus of supply is particularly significant in the Tel Aviv district.
The month of July witnessed one of the weakest performances in terms of new apartment purchases this year. Only 2,375 new units were sold during this month, making it the weakest July in the past five years. It is also worth mentioning that 2023 has seen a 37% decline in the number of apartment purchases compared to last year and a 46% decline compared to the first seven months of 2021.
This downturn poses a significant challenge for real estate developers who had anticipated a more prosperous market based on the data from 2021 and 2022. Consequently, construction of many projects began, leading to a continuous increase in the supply of unsold apartments. As of the end of July, there were approximately 60,000 unsold units, with the Tel Aviv district accounting for over 18,000 apartments and the Central district for 14,000.
These statistics further support the claims of the Chief Economist, who has observed a significant decrease in transactions in districts such as Tel Aviv, where construction has been rapidly escalating, particularly in urban renewal projects. The main reason behind this decline is believed to be the financial inability of many individuals to afford the high apartment prices, especially in the current high-interest rate environment.
The impact of this situation can be seen in the leading cities for new apartment sales. Tel Aviv, the representative city of the Tel Aviv district, ranks fifth in apartment sales for the months of May to July, with only 358 units sold. This amounts to an average of 100 new apartments purchased per month, compared to 160 sold last year and 330 sold in 2021. No other city in the province made it to the top of the new apartment sales list.
The city leading the sales table is Rishon Lezion, where 532 apartments were sold in the months of May to July. It is followed by Sderot with 495 units sold, Jerusalem with 405 units, and Ashkelon with 364 units sold.
Moreover, the market situation appears even worse when subsidized apartments sold under the “resident price” program are excluded. Approximately a quarter of the 17,000 new apartments sold in the first seven months of the year were subsidized units, which do not accurately reflect the trends of the current free market. When these apartments are deducted from the total number of sales, the situation appears even bleaker.
The current market conditions in the Tel Aviv district paint a concerning picture for developers and buyers alike. With a surplus of unsold apartments and a decrease in affordability, both parties will need to find solutions to navigate these challenging circumstances.