Although it hasn't been reflected in prices, the number of homes being sold in Israel dropped sharply over the past year. As of June 30, the Central Bureau of Statistics said, there were 94,450 homes and apartments under construction in Israel; by August 31, 26,920 were still unsold, a very unusual situation in a country where, in recent years, apartments have been snapped up while still “on paper,” before the first foundation had been dug.

That constitutes 28.5% of all apartments being built, a record high, beating the previous 25% record. According to the Housing Ministry attributed the falloff in purchases to the fact that many people are holding out until passage of the promised law that would allow young couples to buy homes without paying the 18% value added tax.

The law, proposed by Housing Minister Yair Lapid, is still a distant dream, with the bill still not even introduced in the Knesset for its first reading.

Some experts believe that the slowdown in sales is likely to boomerang – that even though prices will be “discounted” by 18%, prices will rise by an even greater amount, because contractors will slow down their construction efforts as the homes they are currently building remain unsold. If and when the law is passed, there will be a rush for the available apartments – but the supply will be very limited, because there will be fewer new apartments under construction because of the oversupply. As a result, prices will shoot up, possibly more than the 18% they will go down for the VAT discount.

In addition to the housing glut, a lack of workers is also holding up new construction, the Ministry said. There is a shortage of workers, resulting in a slower building process. Currently it takes about 27 months to finish an apartment on average, as opposed to the 24-26 months it usually takes, the Ministry said.