Israel’s real estate market continued its eventful start to the new year, with fresh data pointing to sustained growth in housing prices and rents, evolving mortgage activity, and new policy moves. Below is a roundup of the latest developments as of February 18, 2025.
Housing Market Trends and Prices
Continued Price Growth
Recent figures indicate that Israel’s housing prices are still climbing, although the pace of growth may be tapering off. Prices rose an average of 0.4% in the November–December 2024 period, bringing the annual increase to around 7.3%—slightly below the previous 7.8% annual rise. New home prices were up by about 0.7%. Analysts attribute this sustained growth to chronic supply shortages and renewed post-war demand, despite high interest rates adding to homebuying costs.
Rents on the Rise
The tight rental market shows no sign of easing. Tenants renewing leases are typically paying around 2.6% more, while new renters face rent hikes of about 3.3% compared to a year ago. Overall, the Housing Services Index (which reflects rental costs) rose by approximately 0.5% in the latest monthly data and about 3% year-over-year. With both buyers and renters feeling the pinch, concerns about affordability continue to grow.
Mortgage Market and Interest Rates
Mortgage Slowdown in January
Following a surge in December, new mortgage volumes took a steep dive last month. The Bank of Israel reports that Israelis took out about ₪7.3 billion in home loans in January 2025—50% less than December’s unusually high figure (attributed to a rush to beat a VAT increase on home purchases). Despite this dramatic monthly drop, total mortgage lending remained 30% higher than in January 2024, pointing to underlying demand. Rising borrowing costs tied to multi-year-high interest rates continue to temper some buyers’ enthusiasm.
Developer Financing Trends
Only 15.5% of mortgages originated in January were part of deferred “buy now, pay later” deals offered by developers—down from earlier months. Observers suggest that either fewer buyers are using these plans or that developers are withdrawing such offers amid post-war market adjustments. Banks and regulators remain watchful, urging caution in real estate lending after a year of economic stress.
Policy and Regulatory Updates
New Settler Homes Tendered
In a move drawing international scrutiny, Israel issued a tender for nearly 1,000 new housing units in the West Bank, with an anti-settlement watchdog reporting that 974 homes are planned for the Efrat settlement. Critics argue that expanding settlements near Bethlehem poses challenges to future peace agreements. With over half a million Israelis now living in West Bank settlements, these expansions remain a contentious issue.
Market Oversight
The Bank of Israel and other regulators continue to monitor the sector’s stability, particularly mortgage and construction loans, as the economy recovers from the recent conflict. While no new lending restrictions have been announced, banks may be required to increase their provisions for real estate loans if risks rise. Meanwhile, the government is looking for ways to boost construction to alleviate supply shortages and contain price inflation, all while managing labor shortfalls tied to the aftermath of the war.
Investment and Foreign Demand
Surge in Diaspora Investment
A notable uptick in foreign investment has been reported, with the Bank of Jerusalem highlighting “growing international demand” for Israeli real estate. The recent war and global antisemitism have prompted more diaspora Jews to consider purchasing property in Israel, seeing it as both a safe haven and a possible destination for future relocation. The value of mortgages taken by foreign residents has more than doubled, and international fund transfers for property purchases are expected to rise further this year.
Local and Global Deals
Although no major domestic commercial transactions were announced on February 18, activity remains robust. The Hamat Group is proceeding with a 25,000-square-meter logistics center in Ashdod, while Kardan Israel is collaborating with a global partner to build a data-center campus in Shoham. Israeli firms continue to make moves overseas: Medipower is set to purchase a retail complex in New Jersey for $37.5 million, and Hertz Properties has agreed to sell an office building in Texas for $64 million. These deals highlight ongoing capital flows and confidence in real estate both inside and outside the country.
Other Noteworthy Developments
- Real Estate Expo Relocated: An Israel-focused real estate expo for diaspora investors in New York was relocated at the last minute due to concerns about protests. Originally planned for a venue in Boro Park, the event proceeded under tight security at a different site, drawing attention to how overseas Israeli real estate events are facing conflict-related tensions.
- Tel Aviv Redevelopment Plans: The Tel Aviv municipality is proceeding with an ambitious redevelopment plan along Carlebach Street, near the former wholesale market area. Authorities are offering lease extensions to about 150 current property tenants and proposing a 49-year lease framework that will enable the construction of mixed-use towers (office and residential) as leases expire in August 2025. The project envisions demolishing some aging mid-rise structures and modernizing others, with potential new tower heights reaching 9–15 floors. As a result, tenants could see higher rents reflecting the rising value of the redeveloped area.
Conclusion
All signs point to a dynamic, if somewhat strained, Israeli real estate market as of February 18, 2025. Housing prices and rents continue upward, high interest rates slow mortgage activity in unpredictable ways, and the government presses ahead with new settlement units despite international pushback. Meanwhile, the influx of overseas investment reflects the enduring appeal of Israeli property. Whether in the residential, commercial, or policy arenas, the coming months promise continued developments shaping the real estate landscape in Israel.
Sources: Based on data and news reports from The Jerusalem Post, Ynet, Globes, the Associated Press, Borneo Bulletin, and other industry updates as of February 18, 2025.
