Israel’s housing market: A unique phenomenon, both challenging and optimistic

Rising home prices and increasing transactions amidst war reflect strength in Israel's real estate sector.

 Romema 40 (photo credit: AMIT GERON)
Romema 40
(photo credit: AMIT GERON)

The past year in Israel, characterized by three months of conflict and uncertainty, culminated in collective challenges. Since the unexpected attack by Hamas on October 7, the perception of time and normalcy has been disrupted. The war in Gaza has impacted not just Israelis but also Jews globally, contributing to a rise in anti-Semitism and a shaken sense of security.

Reflecting on the current state of 2024, there are looming questions about the impact of the war on Israel's economy. "Wars, in the short term, have a severe negative impact, but they also present growth opportunities post-conflict," observes Ayelet Gonen-Brosh, co-owner of Brosh Group, known for their residential projects in Israel's high-demand areas. 

 34-36-38 Bialik Tel Aviv. The image is for illustration only. (credit: 3dvision LTD )
34-36-38 Bialik Tel Aviv. The image is for illustration only. (credit: 3dvision LTD )

The Israeli Residential Real Estate Market – Distinctive Characters

In Israel, real estate is a matter of cultural and social significance, evidenced by the high homeownership rate of almost 70%. Despite a decade of rising prices, the real estate conversation remains central in Israeli discourse.

Demographically, Israel's positive population growth rate of 2.2%, significantly higher than in other developed countries, is a key demand driver for housing. This growth is fueled by increased life expectancy, a high birth rate, and a steady, albeit measured, immigration of Jews worldwide. The recent rise in anti-Semitic incidents has sparked cautious discussions about Jewish immigration to Israel. Another characteristic is the high population density in the Gush-Dan region and central Israel, where access to transportation and jobs is markedly better than in the country's northern or southern regions.

"A synthesis of these trends indicates a consistently strong housing demand, outpacing the rate of construction," explains Orad Yitzhaki, CEO of Brosh Nir Entrepreneurship. "Additionally, there is a critical shortage of vacant land and aging infrastructure in high-demand central regions. With many residents from border areas expected to seek housing in more central locations because of the war, the demand will further increase in regions where supply is already constrained.”

 34-36 Bloch Tel Aviv. The image is for illustration only. (credit: 3dvision LTD )
34-36 Bloch Tel Aviv. The image is for illustration only. (credit: 3dvision LTD )

Trends in Housing Prices in Israel

Over the past decade, housing prices in Israel have escalated by more than 80%, influenced by unique market dynamics and a prolonged zero-interest rate environment facilitating cheap financing. The recent surge in interest rates, part of combating domestic inflation, has introduced financing challenges for developers and buyers, slowing building starts and making buyers hesitant.

A closer look at the recent sales data illuminates the market's resilience state. In October 2023, for example, the sale of new homes stood at 930, a stark contrast to the 2,004 homes sold in the same month of the previous year, marking a decline of over 50%. Despite this noticeable stagnation in the market, a significant drop in housing prices did not materialize. Current data shows that the mortgage market has returned to its pre-war levels, with a 2% increase in housing prices since the beginning of the year and a significant rise in the number of transactions. According to the Central Bureau of Statistics, approximately 21,580 apartments were sold between December 2023 and February 2024, compared to about a fifth between September and November 2023, indicating buyers are returning to the market.

16 Fishman Maimon Tel aviv. The image is for illustration only. (credit: 3dvision LTD )
16 Fishman Maimon Tel aviv. The image is for illustration only. (credit: 3dvision LTD )

Brosh Group's Forecast

"In a long-term view, demand in Israel exceeds supply by about 20,000 units annually. The cumulative demand shortage, estimated at 200,000 housing units, suggests a continued price increase trend," forecasts Orad Yitzhaki. "With anticipated interest rate reductions and a stabilized security situation, we expect a significant return of buyers to the market, as recent months date tells us," he adds.

The Brosh Group, evolving from a construction company to a leader in residential projects in major Israeli cities, has a notable track record, including significant developments such as the Grand Mall in Be’er Sheva, Ashdod Assuta Hospital, Ir Yamim Mall in Netanya Avnet Tower in Petah Tikva and more. In 2009, the company shifted its focus to initiating residential projects in major cities in Israel – Tel Aviv, Herzliya, and Ramat Hasharon. Brosh Group stands out in the real estate sector as both an entrepreneurial and executing company. They offer their customers peace of mind, ensuring full synergy in the projects they lead.

Looking beyond the economic analysis, there's an important aspect that stands out. The possibility of living in central cities, especially in Tel Aviv, in a manner that meets the demands of 21st-century life is realistically achievable primarily through new construction. The recent conflict has underscored the importance of having protected spaces within apartments, increasing demand for new apartment constructions. Moreover, the need for new construction is not only a response to the war. There's a growing demand for features that enhance urban living – such as common areas for community use, green and energy-efficient buildings, and high-standard building specifications – which are typically found in new residential projects. This trend highlights a broader shift in residential preferences, emphasizing the importance of modern amenities and sustainable living.

2-4 Louis Marshall Tel Aviv.  The image is for illustration only. (credit: 3dvision LTD )
2-4 Louis Marshall Tel Aviv. The image is for illustration only. (credit: 3dvision LTD )

Illustrative of these trends are projects like Tzahala Towers in Tel Aviv, where only a select few exceptional apartments remain available for immediate occupancy. Additional noteworthy projects include those on Louis Marshall, Bloch, and Fishman Maimon Streets in Tel Aviv, as well as on Bialik and Ussishkin Streets in Ramat Hasharon. These developments are emblematic of Brosh Group's distinctive signature – seamlessly integrating into the existing urban landscape while showcasing an impressive design ethos. They offer an urban yet serene residential experience, all built to the highest construction standards. This blend of aesthetic appeal, functional design, and quality construction reflects the Group's commitment to excellence in urban development. In light of this, one of the most exciting projects on the market is 'Ussishkin 74' in Ramat Hasharon. This intimate building features just four floors and offers extremely spacious, well-designed apartments, which is a rare find in such a central area.

"In Israel, the love for real estate is a consistent trend. The regular discussions about housing prices are a testament to this," concludes Ayelet Gonen-Brosh. Despite the headwinds caused at the beginning of the war, she anticipates a resurgence in the upward trend of housing prices. This outlook encapsulates the resilient nature of the Israeli people and the local real estate market, poised for growth amidst changing economic and geopolitical landscapes.

For more information: Brosh Group

This article was written in cooperation with Brosh Group