Housing Rents in Israel Begin to Decline

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Housing rents have declined in several cities in Israel. The main reason is an oversupply of apartments that entered the market following the completion of major residential projects. Landlords are facing increased competition and are being forced to offer discounts, which in some cases reach 5–10%, Globes reports.

Where Housing Rental Rates Are Falling in Israel

The most noticeable declines have been recorded in new residential neighborhoods where a large number of vacant properties have entered the market at the same time. In Ramot Yoram in Netivot, around 56 apartments were available for rent in September, according to Snir Group. Monthly rents were ILS 300–500 ($100–165) below prevailing market levels. In the Nuriyot neighborhood of Rishon LeZion, nearly 80 properties are currently being offered, while rents have fallen by approximately ILS 300–600 ($100–200) in recent months.

A similar situation can be seen in parts of Jerusalem, Modi'in and Petah Tikva. Nir Shmol, CEO of Snir Group, notes that Israel's rental sector consists of numerous local markets, meaning that trends can vary significantly even within the same city.

Supply has increased following the completion of large residential developments, where investors purchased a significant share of the properties. Once the buildings were completed, many owners began looking for tenants. Additional housing has entered the market through the Mehir LaMishtaken program: some lottery winners choose not to move into the apartments they purchased and instead rent them out. The expansion of long-term rental developments is another contributing factor.

Urban renewal also affects the market, although Itzik Levi, chairman of the Israel Chamber of Real Estate Brokers, considers its impact less significant. A substantial share of newly built housing is returned to the original owners. Competition increases much more sharply when a major development, several residential buildings or a long-term rental complex are occupied at the same time.

A wide choice of available properties forces landlords to make concessions. One month of vacancy represents a loss of around 8.3% of potential annual rental income, prompting many owners to accept discounts of 5–10% to secure a tenant more quickly. Demand also weakens after the summer peak, giving renters greater scope to negotiate.

Nationwide, however, the trend remains different. Rents increased by 2.6% when existing leases were renewed and by 4.7% when tenants changed. Local declines generally last for several months until vacant properties are absorbed by the market, after which downward pressure on rents eases.

Jerusalem Housing Market

Large-scale construction has had a significant impact on Jerusalem's rental market. In Mordot Arnona, the number of apartments has increased by more than 50%, including 778 units built under the Mehir LaMishtaken program. Additional supply has come from long-term rental developments and properties purchased by investors.

Four-room apartments in the area are generally offered for ILS 7,400–7,900 ($2,450–2,600) per month. In older and more prestigious parts of Arnona, comparable properties cost around ILS 8,000–9,000 ($2,650–3,000). The difference can therefore reach 10%.

More housing is expected to enter the market in Kiryat Yovel. One development with 130 apartments is already occupied, while another 226-unit project has begun accepting residents. The neighborhood also has a development comprising several hundred long-term rental apartments. Another 425 units are under construction on Antke Street and 146 on Uruguay Street, while thousands more are at various stages of planning.

Ravit Krudo, owner of Ravit Properties, notes that lower rental rates in new neighborhoods do not necessarily indicate an actual decline in prices. Some owners initially based their expectations on rents in established, prestigious locations, while new neighborhoods tend to develop their own price levels. Krudo believes that continued development could gradually transform these areas. An influx of residents encourages the opening of shops, educational facilities and other infrastructure, making the neighborhoods more attractive.

Challenges in Israel's New-Build Housing Market

The rental market is also being affected by difficulties in selling new housing in Israel. Around 7,600 residential transactions were completed in July 2026, down 13.7% from June. The decline was particularly pronounced in the primary market, where new-home sales fell by 20% over the month. Excluding government-supported programs, the drop reached 26%, with around 1,820 units sold without subsidies compared with 2,460 a month earlier.

At the same time, the stock of unsold housing remains high. It stood at 84,130 units in May, rose to 84,280 in June and reached 84,990 by the end of July. The improvement in demand seen in previous months therefore had little impact on accumulated inventory. At the current sales pace, the available stock would be sufficient for 26.9 months.

Excess supply is already affecting property prices. In June–July, overall prices were 1.2% lower than a year earlier, while new-home prices fell by 0.8%. Developers are trying to avoid direct price cuts and instead attract buyers through deferred payment schemes, contributions toward mortgage costs and other financial incentives. As a result, advertised prices may remain unchanged even as the effective terms of transactions become more favorable.

What This Means for Investors

International Investment analysts note that competition for both buyers and tenants is intensifying in Israel's housing market. Rental declines remain limited to certain areas, but the large stock of unsold new homes and weak commercial demand could continue to put pressure on prices. Further developments will depend on a recovery in buyer activity and the pace at which accumulated inventory is reduced.

For investors, these trends mean higher risks in a market with a high cost of entry. Falling property prices limit potential resale gains, while lower rents and longer periods needed to find tenants reduce rental income. The situation is particularly challenging in areas with intensive development, where large numbers of similar properties enter the market simultaneously.

Many Israeli investors are already turning to property markets abroad. Georgia is among the popular destinations, offering lower property prices and higher yields. Israelis are among the leading groups of foreign property buyers in the country. Investors are considering not only residential real estate, where returns are declining, but also hotel properties, which may offer higher returns on investment.