Ministry of Finance: the number of canceled transactions for the purchase of housing from contractors has sharply increased in Israel

If of the transactions for the purchase of housing from contractors concluded in 2021, by the beginning of 2024 only 0.5% were canceled by buyers, then of the transactions of 2022 by the beginning of 2025 – already 2.9%, and of the transactions of 2023 by the beginning of 2026 – 3.6%.

According to the chief economist of the Ministry of Finance, 1.5% of the 2024 deals have already been cancelled, although only a year to two years have passed since they were signed.

The rise in cancellations reflects an increase in the number of families facing difficulties in paying or obtaining a mortgage due to rising interest rates and the rising cost of living. Another factor in the increase in deal cancellations appears to be the popularity of construction contractors’ marketing campaigns, known as 20-80, 10-90 or even 5-95, in which families are offered to buy an apartment “on paper”, investing only 5-20% of its cost, and paying the rest only after moving into the apartment. In this case, the buyer takes out a so-called “balloon loan” for the remaining amount, and the contractor pays interest on this loan. When transferring an apartment, the buyer takes out a regular mortgage and closes the balloon loan in one payment. This transaction format increases the risk of a situation where after 2-3 years the buyer discovers that he cannot take out a mortgage, but must repay the balloon loan.

Most transactions were canceled in the Beersheba area. Of the apartments purchased in Be’er Sheva in 2023, 6.5% were returned to contractors by 2025, and in two thirds of the cases. In Nazareth, 4.8% of transactions were canceled, in Tiberias – 4.2%, in Hadera – 3.8%, in Rehovot – 3.7%, in Jerusalem – 3.1%, in Haifa – 2.7%, in Netanya – 2.4%, in Tel Aviv – 2.3%.