What are the current Israel housing-market trends in May?

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SANDS OF WEALTH

A team specialized in real estate investing in MENA countries (Morocco, UAE, Oman, etc.)

We are a team of financial experts, legal professionals, developers, and local real estate specialists dedicated to helping people like you avoid mistakes when investing in real estate in a foreign place, particularly in Israel. If you'd like to learn more about us, you can check our presentation page.

How this content was created 🔎📝

At Sands of Wealth, we explore the Israeli real estate market every day. Our team doesn't just analyze data from a distance—we're actively engaging with local realtors, investors, and property managers in cities like Tel Aviv, Jerusalem, and Haifa. This hands-on approach allows us to gain a deep understanding of the market from the inside out.

These observations are originally based on what we've learned through these conversations and our observations. But it was not enough. To back them up, we also needed to rely on trusted resources

We prioritize accuracy and authority. Trends lacking solid data or expert validation were excluded.

Trustworthiness is central to our work. Every source and citation is clearly listed, ensuring transparency. A writing AI-powered tool was used solely to refine readability and engagement.

To make the information accessible, our team designed custom infographics that clarify key points. We hope you will like them! All illustrations and media were created in-house and added manually.

What are the current housing price figures for Israel in May, both nationwide and in major cities?

Israel's national average apartment price reached NIS 2.36 million ($650,000) as of June 2025, representing a significant milestone in the country's real estate market.

Tel Aviv maintains its position as the most expensive market, with standard apartments averaging NIS 4.1–4.5 million ($1.1–1.2 million). Jerusalem follows as the second-most expensive city with apartments averaging NIS 3 million ($810,000).

Haifa presents a more moderate pricing environment at NIS 1.9 million ($510,000) for average apartments, while Be'er Sheva offers the most affordable option among major cities at NIS 1.28 million ($345,000). These price points reflect the geographic and economic disparities across Israel's major urban centers.

The northern regions have emerged as particularly strong markets, showing robust price appreciation. Central Israel continues to command premium pricing, though some areas are experiencing inventory buildup that may affect future price movements.

It's something we develop in our Israel property pack.

How have housing prices changed compared to last month and over the past year?

Monthly price movements in April-May 2025 showed mixed results across different regions, with some markets experiencing minor corrections while others continued their upward trajectory.

Tel Aviv and Jerusalem both registered slight monthly declines of 1.2% and 0.9% respectively, suggesting some cooling in these high-priced markets. Conversely, Haifa showed resilience with a 1.4% monthly increase, while northern regions posted a modest 0.5% gain.

Year-over-year comparisons reveal more dramatic changes, with the northern regions leading nationwide growth at 11.7%. Haifa recorded a solid 6% annual increase, Jerusalem grew by 3.8%, and most other major regions registered approximately 2.9% growth. Tel Aviv, despite its monthly dip, still achieved 9.7% annual growth.

Small apartments experienced the most dramatic price surge, jumping 25.7% annually for 1-2 room units, while larger 5.5-6 room apartments saw minimal 0.5% growth. This divergence reflects changing buyer preferences and affordability constraints affecting different market segments.

What is the current demand versus supply situation, and is inventory growing or shrinking?

Israel's housing market faces a paradoxical situation where strong underlying demand coexists with record-high inventory levels and reluctant buyers.

The country now has 78,000 unsold new homes nationwide, representing an all-time record. Tel Aviv alone accounts for 9,263 unsold units, while Jerusalem has 7,489 units sitting on the market. This inventory buildup primarily affects central regions where prices have reached prohibitive levels for many buyers.

Despite strong demographic demand driven by population growth and household formation, actual buyer activity has declined significantly. New home sales dropped 36% year-over-year in May 2025, marking the lowest monthly volume in decades. This disconnect stems from high prices, tighter credit conditions, and economic uncertainty.

Inventory is definitively increasing, particularly in premium markets where buyers are increasingly price-sensitive. However, this excess supply exists alongside a chronic shortage of affordable housing, creating a bifurcated market where luxury and mid-range properties accumulate while entry-level homes remain scarce.

The supply-demand imbalance suggests potential price adjustments in oversupplied segments, while affordable housing will likely continue appreciating due to persistent shortages.

How do current trends differ between apartments, houses, and luxury properties?

Property Type	Price Performance	Market Conditions
Small Apartments (1-2 rooms)	+25.7% annually	Strongest demand, limited supply
Large Apartments (5.5-6 rooms)	+0.5% annually	Stagnating, high inventory
Houses	Minimal growth	Limited buyer activity
Luxury Properties	Resilient pricing	Insulated from market downturns
Middle-tier Homes	Stagnant or declining	High inventory pressure
Entry-level Properties	Strong appreciation	Chronic shortage
New Construction	Variable by location	High unsold inventory

Which regions or cities are experiencing the fastest growth and which are stagnating or declining?

The northern regions of Israel lead the country in housing price appreciation, posting an impressive 11.7% annual growth rate as of May 2025.

Tel Aviv continues to show strong overall performance with 9.7% annual growth, despite experiencing a slight monthly decline. Haifa demonstrates consistent growth with a 6% annual increase and positive monthly momentum of 1.4%.

Jerusalem presents a mixed picture, with 3.8% annual growth but a recent monthly decline of 0.9%, suggesting some market cooling. The southern regions maintain moderate growth around 2.9% annually.

Cities experiencing stagnation or decline include several Tel Aviv suburbs like Bat Yam and Ramat Gan, where unsold inventory could take several years to clear. These areas face particular challenges with oversupply relative to buyer demand.

Peripheral cities such as Be'er Sheva and Ashdod show promise due to government incentives and lower entry prices, though their growth rates remain more modest compared to northern regions.

What are rental prices doing currently, and how do they compare to last year?

Israel's rental market has reached unprecedented levels, with the national average rent hitting a record high of 4,817 ILS monthly by December 2024.

Rental price growth has significantly outpaced both inflation and wage increases throughout the country. This surge stems from the lack of ownership affordability, pushing more people into the rental market as property purchase prices become prohibitive for average earners.

Rental yields remain generally low across major cities, typically ranging from 2-3% in Tel Aviv and Jerusalem. However, budget rental units in peripheral cities can achieve somewhat higher yields, making them attractive for income-focused investors.

The rental market continues to tighten as demand increases while rental supply remains constrained. This trend is expected to persist as long as purchase prices remain elevated and credit conditions stay restrictive.

Regional variations exist, with Tel Aviv and Jerusalem commanding the highest rents while offering the lowest yields, whereas secondary cities provide better rental returns despite lower absolute rental prices.

Are new construction projects accelerating or slowing down, and what does this mean for future supply?

New construction activity in Israel has decelerated dramatically, creating serious concerns about future housing supply adequacy.

Construction starts plummeted 11.9% in Q1 2025, while building permits fell by a substantial 34.9%. Tel Aviv experienced a 26% decline in permits, and the southern regions saw an even steeper 41% drop. These figures indicate a significant slowdown in new project initiation.

The country projects only 60,000-65,000 new units for 2025, which falls short of estimated demand. This construction slowdown results from bureaucratic hurdles, shortage of foreign workers, and financing restrictions that have made development projects less viable.

For future supply, this slowdown means potential shortages when demand eventually rebounds. The construction pipeline takes 2-3 years to materialize into completed homes, so today's reduced activity will impact supply availability through 2027-2028.

This construction decline, combined with current high inventory, creates a complex market dynamic where excess supply exists now but future shortages are likely. Developers are becoming more cautious about new launches given current market conditions.

What do short-term indicators suggest for the next three to six months?

Short-term market indicators point toward continued weak transaction volumes and modest price growth through the remainder of 2025.

High inventory levels combined with tighter credit conditions will likely suppress buyer activity over the next 3-6 months. The 78,000 unsold units nationwide provide a significant overhang that must be absorbed before meaningful price acceleration can resume.

Rental demand will probably continue rising as potential buyers remain priced out of ownership markets. This sustained rental pressure should support rental price growth and maintain investor interest in income-producing properties.

New project launches are expected to remain slow as developers wait for market conditions to improve. This cautious approach by builders will help prevent further inventory accumulation but won't address medium-term supply concerns.

It's something we develop in our Israel property pack.

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 do medium-term forecasts (six to twelve months) say about prices and demand?

Medium-term forecasts for Israel's housing market suggest a potential rebound in both demand and prices during the latter half of 2025 and into 2026.

Analysts anticipate that buyer demand could recover if construction starts don't improve significantly, especially as economic conditions stabilize and regulatory relaxation occurs. The chronic housing shortage underlying Israel's market fundamentals remains unchanged despite current inventory accumulation.

Some locations with excess supply may experience price discounts as sellers become more motivated to clear inventory. However, entry-level and high-demand market segments are expected to remain robust throughout this period.

The combination of slowing new construction and eventual inventory absorption could create supply shortages by mid-2026, potentially triggering renewed price acceleration. Markets with strong demographic fundamentals like the northern regions will likely lead any recovery.

Rental markets should continue strengthening as ownership remains unaffordable for many households, providing sustained income opportunities for property investors.

What are the long-term projections for Israel's housing market over the next three to five years?

Long-term projections for Israel's housing market remain bullish despite current market contradictions, driven by fundamental demographic and supply constraints.

Population growth and chronic supply shortages indicate that property prices will likely continue rising over the next five years, particularly for affordable and luxury market segments. Israel's growing population and limited developable land create persistent upward pressure on housing values.

However, oversupply in some central cities may depress prices locally until current inventory clears. Tel Aviv and Jerusalem suburbs with high unsold inventory could experience several years of price stagnation or modest declines before recovering.

The construction industry's current slowdown will likely create supply shortages by 2027-2028, potentially triggering significant price acceleration once current inventory is absorbed. This cyclical pattern suggests strong appreciation potential for properties purchased during the current market weakness.

Regional differentiation will become more pronounced, with northern regions, secondary cities, and affordable housing segments likely outperforming oversupplied premium markets in central Israel.

If you want to buy for personal living, which areas and price ranges currently make the most sense?

For personal living purposes, the northern regions and Haifa offer the optimal combination of affordability and recent growth potential in September 2025.

The northern districts provide excellent value with average prices ranging from NIS 1.9-2.36 million, combined with the strongest price appreciation trends at 11.7% annually. These areas offer good quality of life while remaining more accessible than Tel Aviv or Jerusalem.

Haifa represents another attractive option with average prices around NIS 1.9 million ($510,000) and consistent 6% annual growth. The city provides urban amenities at more reasonable costs compared to Israel's primary metropolitan areas.

Be'er Sheva, Ashdod, and other peripheral cities appeal to families and new immigrants due to lower prices averaging NIS 1.28 million ($345,000) and new government incentives supporting development in these regions.

For those requiring proximity to major employment centers, consider smaller apartments in Tel Aviv suburbs where current inventory buildup may create buying opportunities, though prices remain elevated compared to other regions.

If you're buying as an investment—whether for rental income or resale—where, what budget, and what property types look best right now?

Investment-focused buyers should target small budget apartments for maximum capital appreciation and rental income potential in the current Israeli market.

1. **Small apartments (1-2 rooms)** offer the strongest investment performance with 25.7% annual price growth and higher rental yields compared to larger units.2. **Northern Israel** provides the best regional opportunities with 11.7% annual appreciation and more affordable entry points for investors.3. **Tel Aviv selective areas** with temporary inventory buildup may offer buying opportunities for patient investors willing to wait for market recovery.4. **Haifa** presents consistent growth at 6% annually with better affordability than central markets.5. **Luxury properties** in Tel Aviv and Jerusalem remain resilient for high-budget investors, showing strong performance despite overall market volatility.

Budget-wise, focus on the NIS 1.5-2.5 million range for optimal rental demand and appreciation potential. Properties above NIS 3 million face more limited buyer pools and higher vacancy risks.

New construction in emerging neighborhoods could offer significant upside once supply stabilizes, particularly in northern regions where development activity remains more balanced with demand.

It's something we develop in our Israel property pack.

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.

Sources

1. Israel Price Forecasts - Sands of Wealth
2. Average Apartment Price Israel - Sands of Wealth
3. Housing Shortage Meets Buyer Apathy - International Investment
4. Home Prices in Israel 2025 - Buy It In Israel
5. Israel Housing Prices Drop - Buy It In Israel
6. Israel's Housing Market Crashes - International Investment
7. New Home Sales Plunge - Buy It In Israel
8. Israeli Real Estate Market for Wealthy - Globes
9. Rental Prices Average - CEIC Data
10. Real Estate and Economic Growth Israel 2025 - Isra Land