By Semerenko Group News, February 14, 2025
Israel’s real estate market experienced notable developments over the past two days, with increased investor activity, heightened government efforts to accelerate housing construction, and continued shifts in mortgage trends.
Government Eases Restrictions on Foreign Construction Workers
On February 13, the Israeli Cabinet approved a policy raising the quota of foreign construction workers allowed into the country. The measure seeks to alleviate labor shortages exacerbated by recent security tensions. According to an official statement from the Ministry of Construction and Housing, the updated quota will enable up to 30,000 additional laborers from abroad, primarily from China, Eastern Europe, and Southeast Asia.
“We believe this move will help expedite key residential projects currently facing serious delays,” said Housing Minister Lior Cohen at a press conference on Wednesday.
Analysts suggest that while this change could ramp up housing supply in the mid- to long-term, it may not immediately tame escalating home prices in Tel Aviv, Jerusalem, and other high-demand areas.
Mortgage Activity Levels Off After Year-End Surge
After a record-breaking December 2024—when homebuyers rushed to secure mortgages before a proposed tax hike—Israel’s mortgage volume declined in January. Globes reports that new mortgage signings fell by roughly 50% compared to the December peak. However, year-over-year figures still show a 30% increase, indicating sustained demand in the housing market.
“Investors are still fueling a significant portion of purchases, despite the higher interest environment,” said a Bank Hapoalim mortgage advisor quoted in The Jerusalem Post on Tuesday.
Economists warn that the continuing rise in interest rates—currently at 4.5%, per the Bank of Israel—could weigh on prospective buyers’ borrowing capacity. A potential rate cut toward mid-2025 remains contingent on inflation easing back to the government’s target range.
Investors Return to Residential & Commercial Markets
- Residential Luxury Boom: Local media outlets, including The Times of Israel, note an uptick in foreign buyer interest in Israel’s high-end real estate market, particularly in prime Jerusalem neighborhoods. Recent ultra-luxury transactions in late 2024 crossed the ₪60 million mark, highlighting robust appetite for trophy properties.
- Commercial Deals: On February 12, Israeli firm Allied Real Estate disclosed the acquisition of a controlling stake in Metropolis Ltd., an urban renewal company, for approximately ₪200 million. Industry insiders say the move underscores continued confidence in mixed-use development ventures across Greater Tel Aviv.
- Overseas Expansion: Major Israeli property groups like Mishorim are also staying active abroad. On February 13, the company announced a $14 million (~₪50 million) purchase of a Florida shopping center, reflecting a broader strategy of portfolio diversification in international markets.
Delays in Public Housing Projects
Despite some positive signs, ongoing political deadlock over the 2025 state budget is causing funding constraints. Haaretz reports that post-war reconstruction projects in northern and southern border communities remain stalled in the absence of full budget approval. Without additional allocations, public housing initiatives and infrastructure developments in these areas risk further delays.
“We’re reaching a critical juncture where, without a budget, necessary projects simply can’t move forward,” warned a senior official from the Finance Ministry on Wednesday.
Outlook
Market watchers agree that Israel’s real estate sector remains on a growth trajectory, buoyed by strong demand from both local and foreign buyers. However, the combination of higher mortgage rates, budget delays, and possible global economic headwinds could introduce volatility in the coming months.
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Disclaimer: This article is based on publicly available information from Israeli media, government statements, and industry sources as of February 14, 2025. For the most current updates and official data, please consult the relevant agencies and news outlets directly.
