How is the property market forecast in Israel?

Authored by the expert who managed and guided the team behind the Israel Property Pack

Everything you need to know before buying real estate is included in our Israel Property Pack

Who is the author of this content?

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's the current average home price in Israel in 2025, and how does it compare to last year's figure in shekels?

The average apartment price in Israel has reached NIS 2.36 million as of early 2025.

This represents a significant increase of 4.7% to 7.5% compared to 2024, when the average apartment price was approximately NIS 2.26–2.27 million. The price growth continues despite ongoing economic and geopolitical pressures affecting the region.

The residential property market in Israel shows remarkable resilience with consistent year-over-year appreciation. These price increases reflect strong underlying demand, limited housing supply, and continued population growth driving competition for available properties.

Tel Aviv and Jerusalem command premium prices above the national average, while peripheral cities offer more affordable entry points for buyers. The price differential between central and outlying areas continues to widen as urban centers experience stronger appreciation rates.

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

How many new housing units are expected to be built this year compared to the 60,000 that were completed in 2024?

New housing construction in Israel faces mixed signals in 2025 with a notable decline in construction starts during the first quarter.

In Q1 2025, only 17,004 new housing units were started, representing a substantial drop from the record high of 26,139 starts recorded in Q4 2024. This decline suggests the annual pace of new construction may decrease compared to 2024's completion of 60,000 units.

However, building approvals tell a more optimistic story. By mid-March 2025, over 10,503 new units had already received approval, surpassing the entire 2024 approval count of 9,971 units. This indicates strong pipeline development for future construction phases.

The construction industry faces challenges from higher material costs, labor shortages, and regulatory delays. These factors may limit the actual completion rate despite approved projects, suggesting 2025 completions could fall below the 60,000 units achieved in 2024.

Regional variations exist with northern and southern districts seeing increased approval activity, while central areas maintain steady but more selective development patterns.

What is the current mortgage interest rate offered by Israeli banks, and how does it compare to the 3%–4% range seen in 2022–2023?

Israeli mortgage rates have increased significantly in 2025, with average rates now ranging between 5.1% and 5.2%.

This represents a substantial increase from the 3%–4% range that borrowers enjoyed during 2022–2023. Fixed-rate, unlinked mortgages are currently quoted at approximately 4.7%–5%, while variable and CPI-linked mortgage options offer slightly lower rates but with greater uncertainty.

The rate increases reflect broader monetary policy tightening by the Bank of Israel in response to inflationary pressures and global economic conditions. Higher borrowing costs directly impact affordability calculations for potential homebuyers, particularly first-time purchasers.

Different mortgage products show varying rate structures. Traditional shekel-denominated mortgages typically offer higher rates, while index-linked options provide some protection against inflation but carry adjustment risks. Foreign currency mortgages remain available but with stricter qualification requirements.

The higher interest rate environment has prompted many buyers to accelerate purchase decisions before rates climb further, contributing to continued market activity despite affordability challenges.

How much have rental prices in Tel Aviv, Jerusalem, and Haifa increased over the past 12 months in percentage terms?

Rental markets across Israel's major cities are experiencing dramatic price increases, with all three metropolitan areas showing strong upward momentum.

City	Annual Rental Growth Rate	Market Characteristics
Tel Aviv	9.7%	Strongest demand, limited supply
Haifa	8.8%	Growing tech sector influence
Jerusalem	Higher than 8.8%	Small apartments up 25.7% nationwide
Northern Districts	25.7% (small apartments)	Rapid gentrification areas
Central Region	Above national average	Spillover demand from Tel Aviv
Southern Districts	Moderate increases	More affordable alternative markets
National Average	10-12%	Broad-based rental inflation

What is the current annual population growth rate in Israel, and how many new households are estimated to be formed each year?

Israel maintains a robust annual population growth rate, typically ranging between 1.5% and 2% annually, though specific 2025 data is pending official release.

New household formation closely tracks population growth patterns, with historical data indicating approximately 50,000–60,000 new households formed each year. This household formation rate aligns remarkably well with the average new housing unit completion pace, suggesting supply and demand remain relatively balanced at the macro level.

Population growth drivers include both natural increase and immigration, with significant inflows from North America and Europe continuing in recent years. Young demographics and high birth rates contribute to sustained housing demand from growing families.

Geographic distribution of new households shows concentration in Tel Aviv, Jerusalem, and emerging peripheral cities. Central region cities benefit from spillover demand as established areas become less affordable for new households.

The strong household formation rate supports continued housing demand despite economic uncertainties, providing fundamental support for both rental and sales markets across Israel.

What percentage of housing transactions are being carried out by foreign investors compared to domestic buyers?

Foreign investment activity in Israel's property market has surged dramatically with a 78% year-over-year increase in late 2024.

While domestic buyers continue to conduct the vast majority of overall housing transactions, foreign investor participation has become increasingly significant, particularly in central Tel Aviv, luxury coastal properties, and Jerusalem's premium neighborhoods. The most active foreign buyers originate from the United States and France.

Foreign investment concentration varies significantly by region and property type. Luxury apartments, new developments, and properties in established neighborhoods attract disproportionate foreign attention compared to peripheral areas or older housing stock.

The surge in foreign investment reflects both geopolitical considerations and attractive yields compared to other international markets. Currency exchange rates and Israel's economic stability contribute to continued foreign buyer interest despite regional uncertainties.

Domestic buyers remain dominant in transaction volume, but foreign capital increasingly influences pricing in premium segments, creating upward pressure on property values in desirable locations.

How many days on average does it take for a property to sell in Israel's major cities, compared to the national average of 90 days in 2023?

The national average time on market for properties in Israel was 90 days in 2023, serving as the baseline for measuring current market velocity.

Tel Aviv and Jerusalem typically experience shorter sale periods than the national average, reflecting stronger demand concentrations in these metropolitan areas. Properties in prime locations within these cities often sell within 60-75 days, particularly well-priced units in desirable neighborhoods.

Market velocity varies significantly by property type, with new developments and luxury properties commanding faster sale times when priced competitively. Older properties or those requiring renovation may take longer to attract suitable buyers.

Seasonal patterns affect sale times, with spring and fall typically showing faster transaction speeds. Summer months may experience slower activity due to holiday periods, while winter months vary depending on economic conditions.

Professional marketing, competitive pricing, and quality property presentation significantly impact time on market, with well-prepared properties selling substantially faster than average market timelines.

What is the unemployment rate in Israel now, and how is it expected to affect housing demand over the next year?

Israel's unemployment rate has historically maintained relatively low levels, typically hovering between 3.5% and 5% in recent years.

The current employment market remains relatively stable despite regional geopolitical challenges. Low unemployment supports continued housing demand by maintaining household income levels and borrowing capacity for potential property purchases.

Economic sectors showing strength include technology, healthcare, and defense industries, providing employment stability for demographics most likely to enter the housing market. These sectors typically offer higher wages, supporting both rental and purchase demand.

If unemployment were to increase significantly over the next year, housing demand would likely moderate, particularly for discretionary purchases and luxury properties. However, Israel's diverse economy and strong fundamentals provide resilience against major employment disruptions.

Employment stability remains a key factor supporting housing market fundamentals, with continued job growth in key sectors likely to sustain property demand through 2025.

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 has been the year-on-year change in construction costs and raw material prices, particularly cement and steel?

Construction costs and raw material prices in Israel have increased year-over-year, driven by both global supply pressures and strong local demand.

Cement and steel prices show upward trends reflecting international commodity price movements, supply chain challenges, and increased construction activity across the region. These cost increases directly impact development economics and ultimately influence final property prices.

Labor costs in the construction sector have also risen due to skilled worker shortages and increased safety requirements. Specialized trades command premium wages, contributing to overall project cost inflation.

Import dependency for certain construction materials makes Israel vulnerable to international price volatility and shipping cost fluctuations. Currency exchange rates also influence the final cost of imported materials.

Developers are adapting by incorporating cost increases into project pricing, using alternative materials where possible, and implementing more efficient construction methods to control expenses while maintaining profit margins.

How much did government subsidies or housing incentives contribute to new buyer demand last year, and are they increasing or decreasing in 2025?

Government subsidies and housing incentives significantly impacted new buyer demand in 2024, though their effectiveness appears to be moderating in 2025.

Previous incentive programs helped stimulate first-time buyer activity and supported demand in peripheral areas where government policy encouraged development. These programs typically included down payment assistance, tax benefits, and preferential loan terms for qualifying buyers.

Anecdotal evidence suggests that government support programs are becoming less effective or are being reduced in 2025 compared to previous years. Budget constraints and changing policy priorities may limit the scope of future housing assistance programs.

The reduced effectiveness of subsidies partly reflects the scale of current price increases, which may outpace the benefit levels provided by assistance programs. Higher property values require larger subsidies to maintain similar affordability improvements.

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

What proportion of new developments are concentrated in Tel Aviv versus peripheral cities, and what's the projected growth split in the next five years?

New development activity in Israel shows a concentrated pattern with Tel Aviv and core central areas receiving the majority of high-density projects.

1. **Tel Aviv Metropolitan Area**: Continues to dominate luxury and high-density development activity2. **Jerusalem Region**: Maintains steady development pace with focus on residential expansion3. **Northern Districts**: Experiencing increased approval rates and growing investor interest4. **Southern Districts**: Showing rising development activity as peripheral growth strategy5. **Central Coastal Cities**: Benefiting from spillover demand and infrastructure improvements

However, building approvals in peripheral areas, particularly northern and southern districts, are increasing as developers and government policy encourage balanced regional growth. This shift reflects both land availability constraints in central areas and affordability considerations.

Within the next five years, planners expect a more balanced split between Tel Aviv-centered development and outlying cities due to necessity and deliberate policy changes. Infrastructure improvements and transportation connectivity will support this geographic diversification.

Peripheral city development focuses on affordable housing, young family accommodations, and mixed-use projects that serve local employment centers. These areas offer better value propositions for both developers and end users.

The projected growth split aims to reduce pressure on central area housing markets while creating viable alternatives that maintain reasonable commuting access to major employment centers.

What do international agencies like the IMF or OECD forecast for Israel's GDP growth in 2025, and how does that tie into housing affordability ratios?

International economic forecasts for Israel typically project GDP growth in the range of 2–3% annually, though specific 2025 projections from major agencies may vary based on regional developments.

Housing affordability ratios in Israel remain stressed as property price increases have outpaced wage growth for several consecutive years. This affordability challenge affects both first-time buyers and households looking to upgrade their housing situations.

The relationship between GDP growth and housing affordability depends on how economic growth translates into household income increases. If GDP growth primarily benefits specific sectors or income brackets, broader affordability may not improve proportionally.

Global economic conditions influence Israel's housing affordability through interest rates, currency values, and international investment flows. Stronger global growth generally supports Israeli economic performance and employment levels.

Policy interventions may be necessary to address affordability challenges if current trends continue, potentially including zoning reforms, development incentives, or targeted assistance programs for key demographics unable to access homeownership at current price levels.

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. Average Apartment Price Israel - Sands of Wealth
2. Home Prices in Israel 2025 - Buy It In Israel
3. Israel Price Forecasts - Sands of Wealth
4. Israel Mortgage Interest Rates - Global Property Guide
5. Israel Price History - Global Property Guide
6. Israel Housing Starts - Trading Economics
7. Settlement Plan Approvals - Peace Now
8. Mortgage Rates in Israel - Even Sapir