Foreign residents snapped up apartments in Israel last month, contributing to the record amount of mortgages taken in December 2024. Since the outbreak of the war, there has been a noticeable increase in apartments purchased by foreign residents, but unlike in the past, buyers are predominantly religious Jews looking for homes in Jerusalem.
All-time record mortgage taking in December, which totaled NIS 13.8 billion, was due to five population sectors that conducted a large number of deals towards the end of the year as buyers rushed to beat the VAT hike.
The first sector that stood out was buyers of apartments priced at NIS 2-3 million, who greatly increased the amount of mortgages they took, especially more expensive loans. 47% of the mortgages taken out by this sector amounted to NIS 1.2 million or more.
A second sector, some of which overlaps with the first type of mortgage borrowers, were people who purchased apartments with mortgages of NIS 1.2-2 million, while a third sector was buyers of new apartments as part of the marketing campaigns by developers, who took out "balloon" loans with deferred repayment dates. These loans amounted to NIS 3.2 billion in December — more than double the previous record.
A fourth sector of buyers who increased the volume of mortgages were real estate investors, whose number in December was the highest since June 2022, and was more than 50% higher than the volume of borrowers in the months preceding it. The fifth sector, and perhaps the most interesting, is that of foreign residents. Since the outbreak of the war, there has been a significant increase in the amount of apartment purchases by this sector.
Recovery from the low-point
Foreign residents still make up only a small percentage of the total Israeli housing market. There are no final figures for 2024 yet, but estimates are that purchases by foreign residents will total 1,900 apartments, about 2% of the market last year. However, this is an increase of about 50% compared with the number of deals carried out in 2023.
Mortgages taken by foreign residents amounted to about NIS 10.7 billion in 2024, up 13% in the first nine months of 2024 compared with the corresponding period of 2023 until the war — immediately after the start of the war there were very few purchases by foreign residents.
According to the Ministry of Finance chief economist the housing market for foreign residents has been on a downward trend since the peak years of 2005-2006.
In those days, foreign residents carried out deals at a rate of 400 per month, and sometimes more; Since then, volumes have dropped drastically, for several reasons: the financial crisis that hit the West from the end of the first decade of the century to the middle of the second decade, housing prices in Israel, which have since risen considerably, the shekel's exchange rate that strengthened against the dollar, and purchase tax has increased.
The Covid pandemic period was the weakest in terms of this market, when only dozens of deals were carried out per month.
Since then, there has been some increase, but not consistently. When the purchase tax was reduced at the end of 2020 by the then Minister of Finance Israel Katz foreign residents began buying more homes in Israel.
After purchase tax on apartments was raised again at the end of 2021, foreign residents reduced the number of purchases, and during 2023, before the outbreak of the war in October, the average monthly number of purchases reached about 100 apartments.
In the first months of the war, purchases were reduced, but since the first quarter of 2024 there has been a significant increase, and it is estimated that in 2024 the number reached an average of 150 apartments per month — a far cry from the peak 20 years ago, but a significant recovery compared to the low of five years ago.
However, in one city, purchases by foreign residents today are almost equal to the peak days. In Jerusalem and its surroundings, there has been an average of almost 100 deals per month in recent months.
This is precisely the big difference between the peaks of 20-30 years ago and what is happening today: Back then, Jerusalem accounted for 25% of all purchases by foreign residents, with Tel Aviv being the most popular city, and Herzliya Pituah, Netanya, Ashdod (the marina that was built at the time), and Ra'anana also competing for this market. Today, very few of those places attract many foreign buyers, and Jerusalem constitutes the bulk of the market.
Typically, these buyers come from the haredi and orthodox communities. For example "Globes" recently reported on Israel Canada's Midtown Jerusalem project, in which many apartments were purchased by a US haredi community. This is not the only example, and other new projects in the city have also sold apartments to non-Israeli haredi communities.
Dominant in the luxury market
The jump in foreign residents' mortgage taking at the end of 2024 suggests that many are looking for new apartments, rather than second-hand homes, and therefore, in order to beat the VAT hike at the start of 2025, they increased purchases and took mortgages in the closing months of 2024.
"Anti-Semitism is rising everywhere, and buyers are coming here from all over," says Jerusalem appraiser Kobi Beer. However, he says that not all of these buyers plan immigrating in the near future. "A large number of them want to 'get their foot in the door' and have the option of living in Israel."
"We see three main sources of foreign resident buyers: the US, England and France. The English and Americans prefer to have an apartment for added security and are less in a hurry to immigrate. The French are immigrating in greater numbers," says a senior mortgage banker. "In recent months, we have seen a significant increase in the number of deals, especially in September, which is the eve of the high holidays, when they traditionally come to Israel and purchase apartments. We also estimate that the numbers measured in November and December will be very big."
Among other things, the presence of foreign residents is clearly felt in the Jerusalem luxury market. In November-December, they purchased 22 apartments at prices of more than NIS 10 million, out of 72 such apartments purchased in 2024, a large part of which were new apartments.