Israel’s construction market in Q4: strong recovery but completions remained subdued; financing risks

ISRAEL - In Brief 20 Mar 2025 by Sani Ziv

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Israel’s construction sector and housing prices have long occupied center stage in Israel’s economic discussions. The persistent shortage of Palestinian workers due to the war has caused delays and forced temporary shutdown of several construction sites, contributing to a rise in housing prices and sparking concerns about a decline in supply over the coming year. Yesterday, we received some very interesting data that shed light on the current market dynamics. Construction surge amid catch-up dynamics and financing In the fourth quarter, seasonally adjusted construction starts in Israel saw a notable jump of 19.1% compared to the previous quarter. This increase follows an even more impressive 39% growth observed in the preceding quarter. On an annual basis, construction starts reached 65.5 thousand—up from 64 thousand in 2023. This figure is close to the 69 thousand starts recorded during the peak of 2022. The data further indicate that, in the second half of 2024, the annualized rate of construction starts accelerated to 74.2 thousand and building permits climbed to a record high of approximately 82 thousand. These strong numbers, however, should be interpreted with caution. Part of the surge in H2 2024 can be attributed to a catch-up effect following an unusually weak first half, which was largely impacted by war-related disruptions. Moreover, the introduction of 20/80 financing schemes—where buyers pay only 10% to 20% of the property price upfront with the remaining balance delayed—has played a significant role in accelerating both property purchases and construction starts. Trends in building starts, completions, and permits  The chart presents key trends in Israel’...