Residential Market
- High Demand and Rising Prices: Israel’s housing demand continues to far exceed supply. Home prices climbed nearly 8% during 2024, driven by eager local buyers and foreign investors prayerforisrael.co.uk. In Jerusalem, for example, the Ramat Shlomo neighborhood – once a source of political controversy – has grown into a “flourishing enclave” home to thousands of families jpost.com, underscoring persistent demand even in formerly contentious areas.
- New Housing Developments: Efforts to boost housing supply are underway. In Lod, a large new neighborhood (Nofei Ben Shemen) was officially inaugurated with 4,300 apartments plus extensive public and commercial space jpost.com. Officials hailed it as a major step to accommodate population growth, with more projects in the pipeline to alleviate the housing shortage.
Commercial Real Estate
- Office Market Slump: The commercial sector, particularly offices, has faced headwinds. Rental prices for office space fell about 16% in 2023 as the tech sector downturn led companies to downsize and vacate space, driving down demand timesofisrael.com. Retail and office landlords have felt the squeeze from both economic slowdown and the recent conflict.
- Cautious Outlook: With the war tensions easing, industry watchers are cautiously optimistic that the commercial real estate market may stabilize in 2025. There are early signs of renewed business activity, but a significant rebound in office rents will likely depend on a broader tech recovery and improved investor confidence in the coming months. (No major new commercial deals were reported today, but stakeholders are eyeing these trends.)
Investment & Finance Trends
- Surge in Foreign Buyers: Diaspora Jewish investors are increasingly viewing Israeli real estate as a safe haven. Amid rising antisemitism abroad, many are buying homes in Israel as a “fallback” option, seeking both financial and physical security jpost.com. Real estate firms report a spike in overseas demand – one company saw sales jump 78% since mid-2023, requiring staff expansion to meet the interestjpost.com. This trend highlights growing international confidence (and emotion-driven interest) in Israeli property.
- Mortgage Market Cooling (After a Spike): After a record surge in home loans in late 2024, mortgage borrowing in January 2025 dropped by 50% from December’s level, according to the Bank of Israel. However, it was still 30% higher than January 2024, reflecting stronger activity than a year ago despite the monthly dip virtualjerusalem.com. Analysts attribute December’s peak to deferred purchases during the conflict and year-end rush, with January seeing a return to more typical volumes. Interest rates remain elevated, so financing costs are in focus, but the continued year-over-year rise in mortgages signals ongoing investment momentum in housing.
