Like many markets worldwide, Israel’s housing supply drag in the face of huge demand has created soaring prices.
Pandemic or Not, Not Enough Apartments or Homes
Apartments make up the vast majority of housing units in cities such as Jerusalem and Tel Aviv while detached single-family houses are the majority in remote areas and suburbs.
Despite apartment construction accelerating +7% during 2021, Nicole Izbicki, an agent with Jerusalem Immobilier in Jerusalem, said, “… (housing inventory) is far from sufficient. (Buyers have) very little choice, and you have to take what there is.”
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Izbicki added, “I keep telling buyers that if they wait, they’ll end up paying +1% more each month, which can end up being a lot of money.”
According to the 2021 Deloitte Property Index, Israel maintained its position as one of its region’s most expensive housing markets.
In Tel Aviv, Deloitte indicated that the average price per square foot was $1,056, an increase of +5.6% since 2019. Beach homes in Tel Aviv average $3,880/square foot though away from the beach, home prices can drop to $2,240/square foot.
An entry-level apartment in Tel Aviv in a modern building with an elevator starts at approximately $1,850/square foot. Daniel Goldstein, director of the Beauchamp Estates realty firm in Tel Aviv, said that prices rise to about $5,500/square foot “…for a penthouse in a modern building on the waterfront.”
Izbicki said that “…the minimum of the minimum” price for an entry-level apartment in Jerusalem comes in at approximately $560/square foot while that the “typical” price for an apartment is twice that amount – “but the sky’s the limit.”
Apartment prices in Jerusalem have soared +160% over the past decade while average property values nationwide have tripled in 20 years.
A forthcoming 93-mile light-rail system across metro Tel Aviv, scheduled for completion in 2032, is also sparking property prices along the trail line, particularly among speculative investors.
Who Buys in Israel
Up until the on-and-off pandemic border closures, foreign buyers have had an outsized role in Israel’s high-end property market.
Locals, however, have picked up the slack since the summer of 2020. Noam Dzialdow, a founding partner and agent with Neot Shiran, said. “…locals started buying like crazy, including properties that foreigners would have bought. (This) change is major.”
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Avraham Monarov, an agent with Israel Sotheby’s International Realty, said that prior to the pandemic, 85% of his clients were foreign buyers. At the pandemic onslaught, 85% of his clients were Israeli and 15% were foreigners. Most of Monarov’s foreign buyers come from the US, France, Britain and South Africa.
Beauchamps Estates’ Goldstein said that Jerusalem attracts Israeli techies, and that observant Jews from the US are now considering the newly cosmopolitan, affluent, sophisticated Tel Aviv after long favoring Jerusalem.
Basics of Buying for Foreigners
There are essentially no restrictions on most foreign residential property buyers in Israel. Both buyer and seller must retain their own lawyers; international buyers can assign power of attorney for transaction executions. Most lawyers charge buyers 1-1.5% of the sale price for doing due diligence on the property.
A sale agreement, executed by both buyer and seller, must be registered with the Israel Tax Authority. Foreigners can and do obtain mortgages from local banks. According to Nimrod Yaron, managing partner with the accounting firm Nimrod Yaron & Co, “Interest rates (for investors) are very low right now, and a good rental can cover your mortgage payments.”
Thanks to The New York Times