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Yes, the analysis of Jerusalem's property market is included in our pack
Jerusalem's rental market offers moderate yields between 2.5% and 3.5% for most property types. The city presents a unique investment landscape where yields vary significantly by neighborhood, property size, and tenant profile, with short-term rentals generally outperforming long-term rentals but requiring more active management.
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Jerusalem's rental yields typically range from 2.5% to 3.5% for apartments, with higher yields in peripheral areas and family-sized properties. Short-term rentals can achieve 4-6% yields but require more management effort.
Purchase prices average ₪3.16 million for standard apartments, with total closing costs adding 15-20% to the purchase price, while ongoing costs including taxes and maintenance range from ₪8,000-9,000 monthly.
| Property Type | Average Gross Yield | Typical Monthly Rent |
|---|---|---|
| 1-Bedroom Apartment | 3.1% | ₪5,600-6,500 |
| 2-Bedroom Apartment | 3.2-3.3% | ₪7,000-8,000 |
| 3-Bedroom Apartment | 3.6% | ₪8,500-10,000 |
| 4+ Bedroom Property | 4.2% | ₪12,000-20,000+ |
| Luxury Properties | Under 2.5% | ₪15,000+ |
| Short-term Rentals | 4-6% | ₪674 per night |
| Villas/Houses | 1.8-2.9% | ₪15,000-25,000+ |
What are the different property types available in Jerusalem, and how does the rental yield vary across them?
Jerusalem's property market offers six main types of residential properties, each with distinct rental yield characteristics.
Apartments represent the most common investment option, ranging from studios to luxury penthouses and delivering yields between 2.5% and 3.5%. Garden apartments, which are ground-floor units with private outdoor space, typically fall within the same yield range but command premium rents due to their outdoor access.
Duplexes and triplexes, featuring multi-level layouts, appeal to families and can achieve yields on the higher end of the apartment range. Villas and private houses, while rare and expensive in central areas, generate lower yields of 1.8% to 2.9% due to their high purchase prices, though they often provide better capital appreciation potential.
Penthouses represent the luxury segment with yields typically below 2.5% because of their premium acquisition costs, though they offer prestige and potential for strong capital gains. Commercial and office spaces, concentrated in the city center and business districts, operate under different dynamics and aren't covered in this residential analysis.
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Which neighborhoods or areas in Jerusalem offer the highest and lowest rental yields?
Jerusalem's rental yields vary dramatically by neighborhood, with peripheral areas offering the highest returns and luxury central districts providing the lowest yields.
The highest yields are found in peripheral and up-and-coming neighborhoods like Pisgat Ze'ev, Ramat Sharet, and Gilo. These areas benefit from more affordable entry prices while maintaining stable rental demand from families and students, often delivering yields above 3.5%.
French Hill and areas near Hebrew University also provide strong yields due to consistent student demand, while neighborhoods with good public transportation connections to the city center offer reliable rental income from working professionals.
In contrast, the lowest yields are concentrated in luxury central neighborhoods including Rechavia, Talbiya, German Colony, and properties near the Old City. These prestigious areas command extremely high purchase prices that rental income cannot match proportionally, resulting in yields below 3%.
The disparity reflects Jerusalem's unique character as both a religious center and modern city, where location prestige significantly impacts property values but doesn't always translate to proportional rental premiums.
How does the average rental yield change depending on the surface size of the property?
Rental yields in Jerusalem increase progressively with property size, making larger family-oriented properties more attractive from a yield perspective.
One-bedroom apartments typically generate yields around 3.1%, serving primarily students and young professionals in a competitive but smaller rental market. Two-bedroom properties perform slightly better with yields of 3.2% to 3.3%, appealing to couples and small families.
Three-bedroom apartments represent a sweet spot with yields around 3.6%, benefiting from strong demand from growing families and the ability to command higher absolute rental amounts. Four-bedroom and larger properties achieve the highest yields at approximately 4.2%, as they cater to large families, particularly in Jerusalem's religious communities where larger households are common.
This size-yield relationship exists because larger properties generate proportionally higher rental income while often being purchased at better price-per-square-meter rates. Additionally, family-sized units typically enjoy longer tenancy periods, reducing vacancy costs and tenant turnover expenses.
The trend also reflects Jerusalem's demographic composition, where larger families create consistent demand for spacious properties, supporting both rental rates and occupancy levels.
What is the typical purchase price for different types of properties, including all fees and closing costs?
| Property Type | Average Purchase Price | All-In Cost (Including Fees) |
|---|---|---|
| Standard 3-Bedroom Apartment | ₪3,160,000 ($850,000) | ₪3.65M - ₪3.8M |
| Luxury Penthouse | ₪7.8M+ ($2.1M+) | ₪9M+ |
| Eastern Jerusalem (per m²) | ₪18,000 - ₪25,000 | ₪21,000 - ₪30,000 |
| Central Luxury Areas (per m²) | ₪31,400 - ₪90,000 | ₪36,000 - ₪108,000 |
| Garden Apartment | ₪3.5M - ₪5M | ₪4M - ₪6M |
| Villa/Private House | ₪8M - ₪15M+ | ₪9.5M - ₪18M+ |
| Studio Apartment | ₪1.8M - ₪2.5M | ₪2.1M - ₪3M |
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What are the ongoing costs of owning a property in Jerusalem, such as taxes, maintenance, and management fees?
Jerusalem property ownership involves several ongoing costs that significantly impact net rental yields and must be factored into investment calculations.
Municipal tax (Arnona) represents the largest regular expense, ranging from ₪3,000 to ₪6,000 annually (₪250 to ₪500 monthly), with higher rates in central and prestigious areas. This tax is based on property size and location, with luxury neighborhoods paying premium rates.
Building maintenance fees (Va'ad Bayit) vary dramatically by building type and services, ranging from ₪300 monthly for basic buildings to ₪1,000 monthly for full-service luxury buildings with amenities like elevators, security, and gardens. These fees cover common area maintenance, building insurance, and shared utilities.
Property insurance typically costs ₪1,000 to ₪3,000 annually, depending on property value and coverage level. Utilities, when paid by owners between tenancies or for vacant periods, average ₪600 to ₪1,200 monthly including electricity, water, and gas.
Total monthly ownership costs typically range from ₪8,000 to ₪9,000 for a standard apartment, including mortgage payments if financed. These figures exclude property management fees for investors using professional management services, which typically add 8-12% of rental income.
How does financing with a mortgage impact the net rental yield compared to buying in cash?
Mortgage financing significantly impacts net rental yields in Jerusalem, with current interest rates making cash purchases generally more attractive from a yield perspective.
As of September 2025, average mortgage rates stand at approximately 6.75% for 30-year loans. This high interest rate environment means financing costs often exceed rental yields, creating negative leverage for many properties.
For a typical ₪3.16 million apartment, a mortgage with 25% down payment would result in monthly interest payments of approximately ₪14,000, while the same property might generate only ₪8,500 in monthly rent. This scenario creates negative cash flow before considering other ownership costs.
Net yields typically decrease by 1-2 percentage points when using mortgage financing compared to cash purchases, unless investors achieve strong capital appreciation that exceeds the interest cost differential. The break-even analysis favors cash purchases unless property values appreciate by more than 7-8% annually.
However, financing can still make sense for investors seeking to diversify across multiple properties or those confident in capital appreciation prospects. Leverage amplifies both gains and losses, making the financing decision crucial for overall investment success.
What are the average rental prices for different property types and sizes in Jerusalem today?
Jerusalem's rental market as of September 2025 shows significant variation by property size and location, with prices reflecting both local demand and international influence.
One-bedroom apartments in city center and expatriate-friendly neighborhoods command ₪5,600 to ₪6,500 monthly, serving primarily young professionals, students, and international workers. These properties benefit from high demand but also face competition from the university housing market.
Two-bedroom properties rent for ₪7,000 to ₪8,000 monthly, appealing to couples and small families seeking modern amenities and central locations. Three-bedroom apartments, representing the family market sweet spot, typically rent for ₪8,500 to ₪10,000 monthly, with luxury units commanding up to ₪15,000.
Four to five-bedroom properties and duplexes cater to larger families and can achieve ₪12,000 to ₪20,000+ monthly, particularly in religious neighborhoods where large families are common. Villas and premium houses command ₪20,000+ monthly, serving affluent families and diplomatic personnel.
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How do yields differ between short-term rentals (like Airbnb) and long-term rentals?
Short-term rentals in Jerusalem significantly outperform long-term rentals in gross yield terms but require substantially more active management and carry additional risks.
Airbnb and similar short-term rental platforms generate gross yields of 4% to 6%, notably higher than the 2.5% to 3.5% typical for long-term rentals. Average short-term rental revenue reaches approximately ₪133,000 annually ($35,000), with average daily rates around ₪674 ($177) and occupancy rates near 55%.
However, short-term rentals face higher operating costs including cleaning fees, guest management, platform commissions (typically 3-5%), higher insurance premiums, and potential regulatory compliance costs. These expenses can reduce net yields by 1-2 percentage points compared to gross figures.
Long-term rentals offer more predictable income streams with lower management intensity, reduced vacancy risks, and stable tenant relationships that can last several years. They also avoid the seasonality challenges that affect short-term rentals, particularly during religious holidays and security-sensitive periods.
The choice between rental strategies depends on investor management capacity, risk tolerance, and local regulations, which continue evolving regarding short-term rental operations in residential areas.
What kinds of tenant profiles are most common in Jerusalem, and how do they affect rental demand?
Jerusalem's rental market serves four distinct tenant profiles, each creating specific demand patterns that influence yields and vacancy rates.
Students from Hebrew University and Bezalel Academy create consistent demand for smaller properties near campus areas, particularly in French Hill and surrounding neighborhoods. This segment provides stable rental income during academic years but may experience seasonal fluctuations during summer breaks.
Diplomats, researchers, and NGO workers represent the international tenant segment, typically seeking modern, well-equipped properties in central locations with good connectivity. These tenants often accept premium rents for quality accommodations and tend to maintain properties well.
Religious families constitute a significant portion of Jerusalem's rental market, particularly seeking larger properties near synagogues, religious schools, and kosher food sources. This segment values long-term stability and community connections, often resulting in extended tenancies and lower turnover costs.
Young professionals and olim (new immigrants) create demand for modern, centrally-located properties with good public transportation access. This growing segment drives rental growth in trendy neighborhoods and supports premium rents for updated properties.
Areas serving students and international workers typically experience lower vacancy rates and regular rent increases, while ultra-Orthodox neighborhoods enjoy consistent, if slower-growing, rental demand.
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Israel versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.
What are the current vacancy rates by area and property type?
Jerusalem's vacancy rates vary significantly by location and property type, with central areas and family-oriented properties maintaining the lowest vacancy levels.
The lowest vacancy rates occur in city center locations, university-adjacent areas like French Hill, and established family neighborhoods near quality schools. These areas often experience vacancy rates below 5% due to consistent demand from their respective tenant segments.
Higher vacancy rates typically affect peripheral new developments where infrastructure and community services are still developing, larger luxury properties that serve a smaller tenant pool, and some eastern Jerusalem sectors where political considerations may influence rental demand.
The typical vacancy range across Jerusalem spans 6% to 9%, with central family apartments and student-oriented properties performing better than luxury or peripheral options. Properties serving religious families often experience particularly low vacancy due to community stability and longer tenancy preferences.
Seasonal variations can affect certain property types, particularly those serving international tenants or students, while family-oriented properties in established neighborhoods maintain more consistent occupancy throughout the year.
How have rental prices and yields evolved compared to one year ago and five years ago, and what are the forecasts for one, five, and ten years ahead?
Jerusalem's rental market has shown steady growth over recent years, with acceleration during the post-pandemic period followed by some stabilization in 2024-2025.
Over the past year (2024-2025), rental prices have increased by 4% to 8%, with yields stabilizing as property prices have also risen. This represents a moderation from the more dramatic increases seen in previous years, suggesting market maturation.
Since 2020, the market has experienced steady appreciation of 7% to 8% annually for both rental prices and property values. However, yields have contracted slightly as property price growth has outpaced rental increases, particularly in sought-after central neighborhoods.
Short-term forecasts for 2026 and beyond predict continued but more moderate growth, with annual price increases of 3% to 7% expected. Yields are forecast to remain stable to slightly compressed unless rental growth accelerates to match property price appreciation.
Long-term projections suggest Jerusalem's rental market will continue benefiting from population growth, urban development, and its unique position as Israel's capital, though growth rates may moderate as the market matures.
How do rental yields in Jerusalem compare with those in other major cities that are similar in size and profile?
| City | Typical Gross Yield | Market Characteristics |
|---|---|---|
| Tel Aviv | 2-3% | Lowest yields due to premium prices |
| Jerusalem | 2.5-3.5% | Moderate yields, stable market |
| Haifa | 3.2-5% | Higher yields, especially apartments |
| Be'er Sheva | 4-5% | Highest yields, strong student demand |
| Netanya | 3-4% | Coastal premium with good yields |
| Eilat | 3.5-5% | Tourism-driven rental market |
| Ashdod | 4-4.5% | Growing city with strong yields |
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Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
Jerusalem's rental market offers moderate but stable yields that position it favorably within Israel's real estate landscape.
Success in Jerusalem property investment requires careful neighborhood selection, understanding of tenant demographics, and realistic expectations about yield potential versus capital appreciation opportunities.
Sources
- Jerusalem Real Estate - Advanced Search
- Global Property Guide - Israel Rental Yields
- EasyAliyah - Jerusalem Real Estate Market Report Q1 2025
- Sands of Wealth - Israeli Property Market Trends
- AirROI - Jerusalem District Report
- Sands of Wealth - Jerusalem Property
- Airbtics - Annual Airbnb Revenue in Jerusalem
- Properstar - Jerusalem House Prices
- Bank Jerusalem - Mortgage Rates History
- Sands of Wealth - Israel Price Forecasts