Real Estate Investment in Israel: Investors Shift to More Expensive Properties

Investment properties in Israel have increased in price by 14% between December 2023 and June 2024, reaching an average price of ₪2.3 million. This is despite a noticeable drop in the number of transactions, according to the Globes portal, citing data from the Israel Tax Authority.

In 2022, there were 1,736 investment property transactions per month. In 2023, that number dropped to 1,150, and in early 2025 it rebounded slightly to 1,260. Between January 2023 and June 2024, prices for investment apartments rose significantly—from ₪2 million to ₪2.3 million. In December 2023 alone, the average price was 11% higher than the same month in 2022.

What Investors Are Buying

Analysts note that while studio apartments became cheaper in 2023, investors were opting for higher-priced assets. From 2019 to 2021, investment properties averaged ₪1.3 million. From 2021 to Q1 2023, they hovered between ₪1.5–1.6 million. In January 2024, the average broke the ₪2 million mark—even amid wartime instability.

The Israel Tax Authority also reported a ₪1.5 billion increase in government revenue from real estate taxes in 2024 compared to 2023. Total revenues reached ₪26.4 billion—₪10.3 billion from purchase taxes and ₪5.6 billion from capital gains taxes.

Israel levies progressive purchase taxes on buyers and capital gains tax on sellers who own multiple properties. Thus, state revenues are highly dependent on price trends and transaction volume.

Role of Foreigners and New Immigrants

One key driver in 2024 was foreign buyers and new immigrants. According to Ynetnews, new immigrants paid about 73% more than the average buyer, while foreigners paid 71% more. Foreigners accounted for around 10% of all investment purchases, contributing ₪432 million in taxes—about 15% of the total collected in the sector. Notably, foreigners are not eligible for tax benefits unlike some Israeli residents.

Low Yields, High Prices

Despite rising prices, rental yields remain low. According to Global Property Guide, the average gross rental yield in Israel in Q3 2024 was just 2.76%. The highest was in Beersheba (3.77%), followed by Haifa (2.63%), Tel Aviv (2.56%), Ra’anana (2.44%), and Jerusalem (2.38%)【source】.

In Tel Aviv, a 1-bedroom apartment ranges from $800K to $2M, while 2-bedroom units cost around $1.1M. In Jerusalem, entry prices start at $742K. Haifa is more affordable (starting at $345K), and in Beersheba, a 1-bedroom unit can be purchased for $181K, with 3-bedroom apartments costing about $239K.

Growing Preference for Overseas Real Estate

Faced with high taxes and low returns, many Israeli investors are shifting abroad. Popular destinations include Europe, the US, and Georgia. In Tbilisi, Israelis have even surpassed Russians in the number of registered transactions. Experts cite high yields (averaging over 9%) and significantly lower prices as key advantages. Georgia’s affordability and investor-friendly policies make it a strong alternative to Israel, the US, and parts of Europe.