Authored by the expert who managed and guided the team behind the Israel Property Pack
Yes, the analysis of Jerusalem's property market is included in our pack
What is happening in Jerusalem’s real estate market? Are prices climbing or stabilizing? Is the city still attracting international buyers and investors? How are local government policies shaping the real estate landscape in 2025?
These are the questions we hear every day from professionals, buyers, and sellers, from the Old City to the modern neighborhoods of Jerusalem. Perhaps you’re curious about these trends too.
We know this because we stay closely connected with local experts and individuals like you, exploring the Jerusalem real estate market daily. That’s why we crafted this article: to offer clear answers, insightful analysis, and a comprehensive view of market trends and dynamics.
Our aim is straightforward: to make sure you feel informed and confident about the market without needing to search elsewhere. If you think we missed something or could improve, we’d love to hear your feedback. Feel free to message us with your thoughts or comments, and we’ll strive to enhance this content for you.
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1) Foreign buyers will focus on central and historic Jerusalem, showing less interest in the outskirts
Foreign buyers are flocking to central and historic areas of Jerusalem, and this trend is only growing stronger.
In 2023 and 2024, property prices in these sought-after neighborhoods skyrocketed. Areas like Rehavia, Talbiya, and Mamilla saw luxury real estate prices soar, with penthouses fetching up to NIS 100,000 per square meter. This clearly shows the high demand for prime locations.
The Iron Swords War has further fueled this trend, as affluent foreign buyers are increasingly seeking permanent homes in central Jerusalem. Real estate reports from 2024 highlight a surge in transactions in these neighborhoods, with projects like the Holyland attracting significant interest from Jewish communities abroad.
Jerusalem's rich cultural and historical allure continues to draw a diverse set of buyers. Government efforts to preserve and enhance these historic areas have only added to their appeal, alongside investments in infrastructure and amenities that promise a high-quality lifestyle.
Real estate agents are noticing a marked increase in interest from wealthy foreign residents. These buyers are particularly keen on central locations, driven by the unique blend of history and modern living that Jerusalem offers.
Sources: Globes, Capitil, Jerusalem Post
2) Rental yields in the Old City will drop as stricter short-term rental regulations take effect
Rental yields in the Old City are expected to decline as stricter regulations on short-term rentals are enforced.
In Tel Aviv, when the city tightened its grip on short-term rentals, the average gross rental yield fell from 2.92% in 2023 to 2.53% in 2024. This trend is now echoing in Jerusalem's Old City, where authorities are ramping up enforcement actions against short-term rental properties. Property owners are feeling the pressure as these regulations start to bite.
Many property owners in Jerusalem are shifting from short-term to long-term rentals. This shift is largely due to the new regulations, and long-term rentals typically offer lower monthly returns compared to their short-term counterparts. As a result, rental yields are naturally expected to dip.
Looking at other cities like Barcelona, we see a similar pattern. When stricter regulations were introduced there, short-term rental activity took a nosedive, leading to a noticeable drop in rental yields. This serves as a cautionary tale for those eyeing properties in Jerusalem's Old City.
For potential buyers, it's crucial to understand that these regulatory changes are not just a passing phase. They are part of a broader trend aimed at controlling the short-term rental market. Investors should be prepared for a shift in the rental landscape, with long-term rentals becoming more prevalent.
As the Old City adapts to these changes, property owners and investors need to stay informed and flexible. Understanding the local market dynamics will be key to navigating this evolving environment.
Sources: Global Property Guide, Kesher Realty, AirDNA
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.
3) City center rental yields will rise as tourist demand for short-term rentals increases
Jerusalem has seen a surge in tourists in 2023 and 2024, with 2.5 million visitors exploring the city.
This influx, mainly from the USA, France, Germany, and the UK, has led to a significant boost in demand for short-term rentals in the city center. Occupancy rates for these rentals have been impressively high, even outpacing Tel Aviv. For example, whole apartments in Jerusalem hit an occupancy peak of 85% in December 2019.
With such high demand, property owners can charge more per night, especially during peak tourist seasons, leading to increased rental yields. The average daily rates for short-term rentals in Jerusalem range from $160 to $210 per night, depending on the season.
Jerusalem ranks 10th among the best cities for Airbnb hosts, with hosts earning on average 243% more than private landlords. This indicates a thriving market for short-term rentals, driven by tourists' preference for city center accommodations.
For those considering investing in property, the city center's rental market is particularly attractive. The combination of high occupancy rates and lucrative daily rates makes it a promising opportunity.
As tourism continues to grow, the demand for short-term rentals is expected to rise, further increasing rental yields. This trend is a clear indicator of the potential for property investment in Jerusalem's city center.
Sources: Tourist Israel, Israel21c
4) Foreign buyers will increasingly target Mamilla for its luxury offerings and closeness to the Old City
The Mamilla area is becoming a hotspot for foreign property buyers, thanks to its luxury offerings and proximity to the Old City.
Property prices in Mamilla are soaring, with new apartments going for NIS 55,000-70,000 per square meter and penthouses fetching even more. This price surge is a clear sign of high demand, drawing in buyers who are eager to invest in this prime location.
Luxury apartment sales are booming, especially in projects like Hashlosha, where penthouses have sold for an average of NIS 100,000 per square meter. This trend highlights the strong market for high-end real estate, with wealthy foreign residents showing increased interest in making Jerusalem their permanent home.
What makes Mamilla particularly appealing is its unique blend of modern luxury and historical significance, being so close to the Old City. This combination is a major draw for foreign buyers looking for both comfort and cultural richness.
High occupancy rates in Mamilla's luxury hotels further indicate a strong demand for luxury real estate. Many visitors are not just tourists; they are potential investors looking to own a piece of this vibrant area.
Foreign buyers are increasingly eyeing Mamilla, attracted by its luxurious lifestyle and strategic location near Jerusalem's historic heart.
Sources: Jerusalem Post, Globes, The Media Line
5) Gilo will experience a price drop due to an oversupply of new apartments
Gilo is seeing a boom in new apartment projects, leading to an oversupply of unsold units.
In 2023, the number of new housing units approved in Gilo skyrocketed to about 7,000, a big jump from the usual 2,500-3,000. This surge is part of a broader trend in Jerusalem, where building permits and construction starts have been on the rise.
Market reports highlight that Gilo now has more unsold apartments than in previous years. The overall property transactions in Jerusalem are dropping, especially noticeable in the first quarter of 2023, hinting that supply is outstripping demand.
Real estate agents are noticing a slowdown in buyer interest in Gilo. While specific surveys for Gilo aren't mentioned, the general decline in Jerusalem's property transactions suggests a cooling demand, which, paired with the construction boom, points to an oversupply.
In other parts of Jerusalem, similar trends are observed, reinforcing the idea that Gilo's market is cooling. The increased construction activity without matching demand is a clear sign of this.
For potential buyers, this could mean more negotiating power and possibly better deals as developers look to offload excess inventory.
Sources: Global Property Guide, Jerusalem Post
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6) Rehavia will see a price rise due to its central location and historical appeal
Rehavia's property prices are climbing due to its central location and historical allure.
In the heart of Jerusalem, Rehavia is seeing a surge in property values. From 2021 to 2022, apartment prices jumped from 2,450,000 to 2,888,650 Shekels, highlighting a clear upward trend. This increase is partly fueled by the neighborhood's proximity to the city center, making it a prime spot for those wanting to be close to the action.
There's also a noticeable influx of international buyers, especially wealthy foreigners, who are captivated by Rehavia's charm. Since the Iron Swords War began, these buyers have been snapping up larger, more luxurious homes, pushing demand and prices even higher. This trend is reshaping the local real estate landscape, as more affluent individuals seek out the unique blend of history and modernity that Rehavia offers.
Rehavia's appeal isn't just about its history; it's also about convenience. The neighborhood's central location means easy access to major city amenities and public transportation, making it a top choice for residents who value both culture and convenience. This combination of factors is driving up property values, as more people are drawn to the area's unique offerings.
For those considering a move to Jerusalem, Rehavia stands out as a neighborhood that offers both historical significance and modern convenience. Its central location and cultural richness make it a desirable place to live, and this desirability is reflected in the rising property prices. As more people discover what Rehavia has to offer, the demand for homes in the area continues to grow.
With its blend of history, culture, and convenience, Rehavia is a neighborhood that truly has it all. Its proximity to the city center and historical charm are key factors driving the increase in property prices, making it an attractive option for both local and international buyers.
Sources: Jerusalem Real Estate, The Jerusalem Post, Capitil Real Estate
7) Demand for properties with fitness facilities and green spaces will grow due to a heightened focus on wellness
In cities like Jerusalem, there's a growing trend towards wellness-focused real estate developments.
People are increasingly looking for homes that prioritize health, and companies like Extell are responding by launching projects in Jerusalem's Rehavia and Talbiya neighborhoods. These developments offer modern amenities tailored to wellness-oriented lifestyles, making them attractive to potential buyers.
The global wellness real estate market is booming, with an 18.1% annual growth from 2019 to 2023, now valued at $438.2 billion. This growth shows a clear consumer preference for properties with fitness facilities and green spaces, which are seen as essential for a healthy lifestyle.
Surveys by the Global Wellness Institute reveal that people want living spaces that enhance physical, social, spiritual, and environmental wellness. This shift in preference is shaping the real estate market significantly.
Media coverage has been instrumental in highlighting the benefits of wellness-focused properties. The increased attention on health and lifestyle advantages of having access to fitness amenities and green spaces is influencing consumer choices.
Social media also plays a role, with discussions frequently emphasizing the importance of wellness in urban living. This online buzz is further driving the demand for properties that offer access to fitness facilities and green spaces.
Sources: Beauty Matter, Jerusalem Post, Global Wellness Institute
8) Property values along the Jerusalem Light Rail route will rise with its expansion
The expansion of the Jerusalem Light Rail is set to boost property values along its route.
When the light rail first launched, properties nearby saw a remarkable increase of up to 172% over a decade. This wasn't just due to the general rise in Jerusalem's property market; the rail's presence played a significant role. People love the convenience of living near a rail station, and this demand naturally pushes prices up.
Accessibility is a game-changer. Homes close to rail stations are often valued higher than those further away. This trend is backed by studies from the National Association of Realtors and the American Public Transportation Association. Buyers are willing to pay more for the ease of hopping on a train to get around the city.
In Tel Aviv, the Red Line is a prime example of how rail projects can enhance property values. It's expected to make commuting a breeze, which is a huge draw for potential homeowners. The same is anticipated for Jerusalem, where the light rail's expansion will likely make neighborhoods more attractive.
Integrating the light rail with new residential and commercial developments can cut down commuting times and add convenience. This synergy is a recipe for rising property values, as people are drawn to areas where they can live, work, and play without long commutes.
All these factors combined suggest that the expanded light rail in Jerusalem will have a positive impact on property values. It's not just about getting from point A to B; it's about transforming neighborhoods into more desirable places to live.
Sources: Globes, TCB Mag, Jerusalem Post
We have made this infographic to give you a quick and clear snapshot of the property market in Israel. It highlights key facts like rental prices, yields, and property costs both in city centers and outside, so you can easily compare opportunities. We’ve done some research and also included useful insights about the country’s economy, like GDP, population, and interest rates, to help you understand the bigger picture.
9) Virtual reality tours will become widespread, enabling international buyers to view properties remotely
Virtual reality tours are becoming a staple for international property buyers who want to explore homes from afar.
In recent years, the real estate industry has embraced virtual reality like never before. This shift is not just a trend; it's a response to the growing demand for more accessible and interactive property viewing options. Imagine being able to walk through a potential new home without leaving your couch. That's the power of virtual tours, and it's catching on fast.
Why is this happening? Well, 67% of home buyers now prefer listings with virtual tours. It's not just about convenience; it's about making informed decisions. Half of internet users are already using these tours to help them choose their next home. And if you're a young adult, you're even more likely to be swayed by a virtual tour when booking a property.
Take Jerusalem, for example. The city is seeing a boom in international property purchases, with projects like Midtown Jerusalem attracting foreign investors. Real estate agencies there, such as Immo Israel, are smartly using 360° virtual tours to close deals faster. These tours not only cut down on price haggling but also make property visits more efficient.
In this digital age, virtual reality is reshaping how we buy homes. It's not just a tool; it's becoming an essential part of the buying process. As more people catch on, the market for virtual tours is set to grow even more, making it easier for buyers worldwide to find their dream homes.
So, if you're considering buying property, especially from another country, virtual tours could be your new best friend. They offer a way to explore and evaluate properties without the hassle of travel, saving you time and money.
Sources: Globes, The Jerusalem Post, Immo Israel, Market.us
While this article provides thoughtful analysis and insights based on credible and carefully selected sources, it is not, and should never be considered, financial advice. We put significant effort into researching, aggregating, and analyzing data to present you with an informed perspective. However, every analysis reflects subjective choices, such as the selection of sources and methodologies, and no single piece can encompass the full complexity of the market. Always conduct your own research, seek professional advice, and make decisions based on your own judgment. Any financial risks or losses remain your responsibility.