The Israeli real estate market experienced diverse shifts on March 21 and 22, 2025, reflecting varying conditions across residential and commercial sectors. Key developments included cooling housing demand, vibrant retail market growth, significant investment deals, new urban renewal projects, and notable government interventions aimed at regulating the property landscape.
Below is a comprehensive breakdown of these recent developments and their implications for buyers, investors, and policymakers.
Residential Real Estate Market Experiences Slowdown
Rising Unsold Housing Inventory Signals Market Cooling
Israel’s housing market is currently navigating a slowdown marked by an unprecedented increase in unsold new apartments. As of early 2025, approximately 80,000 newly built homes remain unsold nationwide, representing nearly a year and a half of typical market absorption—an all-time high.
The cities facing the most significant surplus include Tel Aviv, with around 9,200 unsold units, followed closely by Jerusalem with approximately 7,600 unsold apartments. The build-up is largely attributed to an accelerated construction phase in 2024, initiated before a scheduled VAT increase, which has subsequently outpaced current buyer demand.
Commercial Real Estate Sees Record-Breaking Activity
Massive Turnout Marks Launch of Israel’s Newest Mega Shopping Center
The recently inaugurated BIG Fashion Glilot shopping complex, now Israel’s largest outdoor retail hub, witnessed exceptional visitor numbers during its opening days. An estimated 155,000 shoppers visited over the opening weekend, with a single-day peak attendance of 72,000 visitors causing significant traffic congestion near Glilot Junction.
Despite logistical challenges, the mall achieved unprecedented sales figures, earning the title of Israel’s most impactful retail launch. Major international brands, such as flagship fashion stores and specialty outlets, reported record-breaking sales, highlighting strong consumer appetite and pent-up demand in the retail market.
Office Market Displays Mixed Signals Amid Slowdown
In contrast to retail enthusiasm, the office leasing market in Tel Aviv shows lingering sluggishness, partly due to residual effects from the economic challenges of the previous year. Vacancy rates remain notably elevated in areas traditionally favored by technology firms, such as the Ramat HaHayal district.
However, positive signals emerged recently when developers successfully leased roughly 4,200 square meters of premium office space in Tel Aviv to prominent coworking providers, signaling potential stabilization and future recovery in the office sector.
Significant Urban Renewal Projects Announced in Northern Israel
Northern Israel is set to benefit significantly from several new residential redevelopment initiatives aimed at modernizing older neighborhoods and accommodating demographic growth. Prominent Israeli developer Av-Gad Holdings recently secured contracts for approximately 4,200 new housing units across seven redevelopment projects in the Krayot suburbs near Haifa, Nazareth Illit, and surrounding towns.
Av-Gad Holdings CEO, Re’em Ratzon, described northern Israel as a critical focal point for the country’s future real estate expansion, emphasizing government infrastructure and security investments that enhance attractiveness for young families seeking affordable alternatives outside major urban centers.
Major Real Estate Deals Highlight Strong Investor Confidence
High-Profile Tel Aviv Land Acquisition by Check Point and Israel Canada
Cybersecurity leader Check Point Software and leading developer Israel Canada jointly acquired a prime plot of land in Tel Aviv’s Bitzaron area for roughly ₪825 million ($225 million). The site, historically known as the Kremenetski property, is approved for mixed-use development, including two towers expected to contain about 310 residential apartments and 62,000 square meters of commercial office space.
Under this agreement, Check Point is dedicating approximately ₪515 million for the development of the office spaces, while Israel Canada will invest around ₪310 million for residential units. The joint venture underscores continuing investor confidence and interest in mixed-use developments within Tel Aviv’s strategic locations.
Government Policy Updates and Regulatory Shifts
Enhanced Land Benefits for Druze and Circassian IDF Veterans
Yanki Quint, head of the Israel Land Authority (ILA), recently reinforced commitments to expanding housing benefits for minority soldiers from the Druze and Circassian communities who serve in the IDF. To recognize their longstanding contributions, approximately 210 heavily discounted residential land plots were allocated in the Golan Heights specifically to eligible military reservists through a lottery system.
Further land distributions in northern and Negev communities are anticipated shortly, aligning with broader government initiatives to support equitable housing opportunities for all IDF veterans, enhancing socio-economic development in peripheral regions.
Real Estate Taxation Adjustments to Moderate Market and Increase Revenue
In the new budget measures, the Finance Ministry, led by Minister Bezalel Smotrich, announced plans to freeze annual adjustments of property-related tax brackets through 2027. Under the policy, exemption thresholds for both homebuyers (currently around ₪2.05 million) and capital gains tax exemptions (approximately ₪5.2 million) will remain static despite inflation, effectively raising taxes on property transactions as market values rise.
These fiscal changes are expected to curb speculative real estate investments while significantly contributing to government revenue amid ongoing efforts to stabilize the national deficit following recent regional conflicts.
Economic Conditions: Inflation Moderation Amid Persistent Housing Price Increases
Recent economic data revealed a moderation in Israel’s general inflation rate, which held steady at approximately 3.5% annually as of February 2025, slightly above the Bank of Israel’s target of 1%–3%. Despite general inflation easing, housing costs continue rising modestly, reflecting persistent demand pressures.
Home prices rose by approximately 0.5% in recent months, particularly pronounced in Jerusalem and northern districts. As interest rates remain at multi-year highs, mortgage lending has slowed, influencing home-buying decisions. Analysts predict the Bank of Israel may contemplate interest rate reductions later this year if inflation consistently trends downward.
Market Outlook: Opportunities and Challenges Ahead
The current real estate environment presents opportunities and challenges alike. Buyers may find increased negotiating leverage due to elevated housing inventories, while retail and commercial sectors display vibrant investment activity. Regulatory changes and taxation adjustments are expected to reshape market dynamics, potentially tempering speculative buying.
Looking forward, Israel’s real estate market appears poised for moderate, sustainable growth. Investors and homeowners alike should remain attuned to policy shifts, particularly in taxation and financing conditions, while continuing to monitor regional development trends that shape property values.
