The past year has taught us a thing or two about the Israeli real estate market, which once again proved to be one of the most dynamic and fascinating markets in the world. Record-breaking sales unseen in recent years have placed Israel at the forefront of the global real estate industry. It is hard to find another country where the appetite for real estate reaches such levels. According to the Central Bureau of Statistics (CBS), in December alone, 1,838 apartments were purchased by investors (including foreign buyers) – an increase of 78% compared to December 2023 and a more moderate rise of 19% compared to December 2022.
Paradoxically, Israel appears to have benefited from the global wave of antisemitism, which has driven investments back home. According to data from the international real estate and investment management firm JLL, in 2022, Israeli entities—including institutional bodies, companies, and private investors—invested almost $2.3 billion in overseas real estate projects. A total of 2,292 such transactions were carried out that year.
However, since the onset of the war, Israeli institutional investors seem to have redirected their focus and funds back to the domestic market. Money that was previously funneled abroad is now finding its way into Israeli real estate firms, making the real estate sector the second largest on the stock exchange after hi-tech. Today, over 100 real estate companies are traded on the stock exchange, with a total market value of NIS 204b. ($56b.).
The Big News: Israelis are returning to invest at home. Both private and institutional investors are returning to the local market for several reasons: the global rise in antisemitism, the Jewish Agency's forecast of a million new immigrants from developed nations arriving in Israel by 2028, the VAT hike in January, and promotional sales campaigns like "20-80," which have changed the rules of the game. All these factors have contributed to the unprecedented boom in the real estate market.
That being said, the biggest question arising from these data is: who will dictate the tone in Israel’s real estate market three years from now? The rules of the game are shifting, and insurance companies, with their large cash reserves, are acquiring increasing stakes in leading real estate firms. The owners of these companies are now focusing on increasing property values, strengthening the dominance of major real estate firms in the market.
The Real Estate Boom: Surprising Data
In December 2024, a total of 11,261 apartments were purchased, including those under government subsidy programs—the highest figure since March 2022. This marks a 58% increase compared to the pre-war period.
During times of war, people rush to sales offices to buy apartments—an unprecedented phenomenon worldwide. For instance, during the Ukraine war, there was no similar real estate boom in Kyiv. This is the uniqueness of the Israeli real estate market, which continues to thrive even in complex periods.
One of the most striking data points: since October 2023, the fastest-growing real estate region has been the South. According to the Finance Ministry, 1,106 new apartments were purchased in the Beersheba area in the open market, the second-highest figure since the early 2000s. Annually, 6,334 apartments were sold in this region—the highest number nationwide and even surpassing the previous record set in 2015. Notably, the Beersheba area includes towns like Ofakim, Netivot, and Ashkelon, making it the leading real estate region in Israel.
Yield or Appreciation: What’s Better?
The pressing question today is whether this is a good time to buy an investment apartment. The answer is not straightforward. While the return of investors to the market signals a clear trend, rental yields in Israel remain relatively low—ranging from 2.3% in Tel Aviv to 3.5% in Beersheba. Investing in the stock market or even in a bank at today’s interest rates could yield higher returns.
As one moves further from the center, yields rise, but they are still low compared to other investment options like banks or the stock exchange. However, real estate is not just about yield—it is also about appreciation. Buying a deteriorated apartment on a main street with urban renewal potential can turn an investor into a developer and yield profits three to four times the investment.
Housing prices in Israel are also at a crossroads. After land prices marketed by the Israel Land Authority peaked in 2022, there was a sharp 31.4% decline in land prices for dense housing construction in 2023. This decline comes after two decades of significant price increases. However, raw material and labor costs have risen dramatically, making it difficult for developers to significantly lower apartment prices.
So, Is It Time to Buy an Apartment?
The answer depends on your financial situation. If you can afford it, the answer is likely yes. The expectation is for continued price increases, but the possibility of a crisis should also be considered.
Unfortunately, many people today are buying "notes" rather than actual apartments. A significant portion of free-market sales by developers includes financing benefits that allow buyers to defer the bulk of the payment until the apartment is handed over. In other words, buyers pay a small amount today and the remainder in over four years. This situation resembles the subprime mortgage crisis in the US, though in Israel, it is still in its early stages. Is this a crisis in the making? Time will tell.
It is important to remember that real estate is a long-term investment, with ups and downs along the way. The real estate boom in the North or South largely depends on government policies and future investments in these areas. If the state invests billions, the potential for appreciation and growth will be significant. Ultimately, real estate is not just about money—it is also about faith in the country's future and the resilience of the Israeli community to face challenges and emerge stronger.
