A financing model that helped Israeli developers sell homes without openly cutting prices is reaching a painful reckoning. The Finance Ministry says the number of canceled new-home purchases signed between 2023 and 2025 has climbed from 1,294 at the beginning of the year to 1,821, a 41% increase. The official tally grew by 527 cancellations in just seven months.

At the center of the turmoil are the once-irresistible 20/80 and 10/90 promotions. Buyers paid only 10% or 20% when signing, then deferred the enormous remaining balance until construction was completed. In some contracts reviewed by the Finance Ministry, buyers reportedly paid virtually nothing upfront.

The arrangement gave developers a way to preserve their official asking prices while making expensive apartments appear immediately affordable. Buyers could postpone taking out a mortgage and, in some cases, hoped to resell their rights before delivery at a profit. But the financing problem never disappeared. It was simply pushed several years into the future.

That future is now arriving. Among contracts signed in 2023, 825 have already been canceled, pushing the cancellation rate to 4.3%. For purchases signed in 2024, the number of cancellations rose from 495 to 738 in seven months, lifting the cancellation rate from 1.5% to 2.3%. By comparison, only 0.5% of deals signed during the 2021 housing boom had been canceled at a similar stage.

The figures could deteriorate further. Only about 40% of the apartments sold in 2024 are ready for occupancy, while roughly one-quarter are not scheduled for delivery until 2028 or later. Many buyers therefore have not yet reached the moment when they must produce the remaining 80% or 90% of the purchase price.

Southern Israel is bearing the heaviest impact. The Beersheba tax region, which includes cities such as Beersheba, Ofakim, Sderot, Netivot and Kiryat Gat, recorded 475 cancellations. The Shfela followed with 225, central Israel with 212, Jerusalem with 200 and Tel Aviv with 167. Finance Ministry data also indicates that the pace of cancellations is accelerating in Jerusalem and Tel Aviv, showing that the pressure is no longer limited to lower-priced peripheral markets.

The buyers walking away are not all financially distressed families. A Finance Ministry analysis of nearly 500 southern cancellations found that about 40% of those citing economic reasons earned no more than approximately NIS 12,000 per month. Yet roughly one-fifth belonged to households earning an average of NIS 60,000 gross monthly. Their canceled apartments cost an average of around NIS 1.7 million, suggesting that some buyers were not unable to complete the purchase but had decided the deal no longer made economic sense.

The low amount initially invested may have made that decision easier. In the cancellation files reviewed by Deputy Chief Economist Galit Ben Naim, half of the buyers had paid no more than a few tens of thousands of shekels, while one-third had paid nothing. Although apartment contracts can expose buyers to penalties worth hundreds of thousands of shekels, those penalties were frequently reduced or waived. In the southern region, the average cancellation payment was reportedly just NIS 20,000. In effect, some buyers had obtained something closer to a low-cost option on future apartment prices than a traditionally financed home purchase.

The Finance Ministry considers developer financing promotions the leading suspect, but it has not claimed definitive proof. Mandatory reporting of financing benefits began only in late 2024, after many of the contracts now being canceled had already been signed. Some purchases are also terminated because permits were delayed or other contractual conditions were not fulfilled. Still, the timing, concentration and payment structures provide strong circumstantial evidence that aggressive deferred-payment deals helped create the problem.

The Bank of Israel had already warned that such promotions could increase risks for buyers, developers and potentially the banking system. It imposed additional capital requirements on banks financing projects where more than 25% of contracts defer a substantial portion of the price until delivery. It also capped contractor-subsidized bullet and balloon mortgages at 10% of monthly housing-loan originations. The temporary restrictions remain in force through the end of 2026.

This does not mean Israel’s entire housing market is collapsing. The latest monthly report recorded 8,757 transactions, although the sharp annual increase was heavily influenced by an unusually weak wartime comparison period. More tellingly, free-market sales by developers remained 18% lower than during the same month two years earlier.

The decisive test will come as thousands of deferred-payment contracts reach delivery. Each must ultimately become real cash, be refinanced or return to developers as canceled inventory. The 41% surge is an early warning that part of Israel’s apparent housing demand may have been borrowed from the future.