The average price of new apartments fell 5.7 percent in November, the Finance Ministry reported Monday.
"There has been a significant decline in the number of real-estate transactions since September, and despite a correction in November, we estimate that in light of expected interest-rate hikes, the demand for apartments in general and those for investment will cool down," the ministry said in its year-end report on the real-estate market.
Property prices had been rising since March, the report said.
In November, housing prices dropped 7% in Beersheba, 5% in Jerusalem and Rehovot, and 1.7% in Tel Aviv.
Prices remained steady along the coastal plain, except for Netanya, where they rose 2%. The price of new apartments in Netanya rose an average of 21% since the beginning of the year, the report said.
The average price of a new apartment in 2009 was 14% higher in nominal terms than the year-ago period. The average price of a new apartment in November rose 36% since the beginning of 2008, the report said.
The number of apartment sales for January-November was up 3% compared with the year-ago period. New-home sales were up 17%, while sales of second-hand homes were down 1%.
Demand in the real-estate market started to pick up steam in February and peaked in June, when a record 10,800 apartments were sold, the report said. That followed a downturn in the market since the last quarter of 2008 due to the global economic crisis.
"An analysis of residential apartment purchases in 2009 shows that the interest-rate cuts served as an incentive mainly for young couples to buy apartments in general and new apartments in particular," the report said. "The proportion of first-time buyers of new homes rose to a rate of 67%, compared with a rate of 55% in the previous two years."
The number of second-hand home sales rose only in Haifa, up 13%, and in Beersheba, up 3%. New-home sales rose 39% in Haifa and 18% in Beersheba.
Meanwhile, Housing and Construction Minister Ariel Attias on Monday announced plans to help relieve the housing shortage. He said land tenders would be offered to flood the market with 6,533 apartments in an effort to lower prices.