February 24, 2025
The Israeli real estate market continues to experience dynamic shifts as property prices rise, mortgage activity surges, and key cities undergo major development projects. Investors, policymakers, and homebuyers are closely monitoring these trends, which are shaping the future of the housing sector.
Market Trends
Rising Home Prices
Over the past year, housing prices in Israel have increased by approximately 7.8%, driven by high demand from both local and foreign investors. Limited housing supply has intensified the upward pressure on prices, making affordability a growing concern.
Record Mortgage Activity
December 2024 saw a sharp increase in mortgage activity, with total mortgage values doubling the monthly average of the previous year. This surge was largely due to buyers rushing to close deals ahead of a planned VAT increase, highlighting the influence of fiscal policies on purchasing behavior.
Major Developments in Key Cities
Tel Aviv: Affordable Housing Initiative
The Tel Aviv Municipality has launched a new residential project on Carlebach Street, aiming to provide diverse rental options. Rent pricing will vary based on factors such as building type and floor level, potentially offering relief in one of the country’s most expensive cities.
Jerusalem: Expansion in New Housing Units
Jerusalem has overtaken Tel Aviv in both new housing starts and sales of new apartments, signaling rapid real estate expansion. The city remains a focal point for both domestic and international buyers, further driving demand.
Investor Insights
Opportunities in Tel Aviv
Recent tenders in north Tel Aviv have successfully marketed nearly 4,000 housing units at prices over 40% lower than 2022 levels, presenting a potential investment opportunity for those looking to enter the market at a more affordable rate.
Luxury Market Trends
- Tel Aviv’s ultra-luxury sector continues to break records, with projects like the “She” Tower marketed at approximately ₪165,000 (≈$46,200) per square meter.
- Wealthy foreign investors are driving prices up in central Jerusalem, leading to an increase in “ghost apartments” that remain vacant for much of the year.
Real Estate Policy & Economic Factors
Long-Term Rental Housing Expansion
The government’s “Apartment for Rent” (Dira Le’Haskir) initiative is scaling up, with thousands of new rental units set to be introduced in 2025. Plans are in motion for over 100,000 additional rental apartments nationwide, aiming to address housing shortages and improve affordability.
Cooling Land Prices in Development Tenders
Recent land tenders have seen a drop in prices compared to peak levels in 2021-2022. The redevelopment of Sde Dov in Tel Aviv is a prime example, with the average land cost per apartment falling from ₪2.8M to ₪1.8M, indicating a potential market correction.
Upcoming Real Estate Expo
An upcoming real estate investment expo will provide insights into Israel’s evolving property market. The event will cover investment strategies, market trends, and opportunities for both domestic and international investors looking to build capital in Israel’s thriving housing sector.
Conclusion
The Israeli real estate market remains highly active, with rising property values, significant urban development projects, and shifting investment patterns. While affordability challenges persist, government initiatives and market corrections in land pricing could help stabilize the sector in the coming years. Investors and homebuyers alike will need to navigate these changes carefully to capitalize on emerging opportunities.
