Housing prices in Beit Shemesh have surged even higher. Beit Shemesh saw an increase of 66.4% in the period from 2017-2024, as compared to cities like Jerusalem, Tel Aviv and Petah Tikva, which saw a rise of approximately 47%. One of the factors behind the huge increase in Beit Shemesh was the lower starting point.  Beit Shemesh prices were substantially lower than many of the larger cities, and the huge demand for housing in the city, especially from olim, has been pushing the prices up. However, many potential homeowners now find themselves priced out of the market. Higher mortgage rates have further increased the cost of ownership, making it challenging for first-time buyers to enter the market. So, what options are available for the average person, and for investors?

Live with Family to Save for a Down Payment

Young couples and singles often move in with family to save money for their down payment. This strategy became increasingly common during covid and continues to be an option as property prices remain high. Many young Israelis are dependent on the financial help their families give towards a down payment, but living in one’s parents’ home and saving significant sums for a few years offers a real option to boost that sum and reduce a potentially crippling property price. Renting is often more cost-effective than buying, however, one significant hindrance with this option is the lack of long-term rental options at stable prices. Unlike many Western countries, where institutional investors provide long-term rental housing, Israel’s rental market is largely controlled by private landlords. Although the government has introduced tax incentives to encourage the development of long-term rental housing, these initiatives have had minimal impact so far, leaving tenants at the mercy of fluctuating rental prices. In 2014 the government set up a body called ‘Apartment to rent’ with the hope that it would create approximately 100,000 rental housing units. However, as of January 2025 there were barely 5,000 units, with 15,000 currently under construction, well below the more than 50,000 newly created households annually in Israel.

Consider Buying in the Periphery and Rent Where You Want to Live

For those looking to enter the property market, one strategy is to purchase in Israel’s periphery while renting in more expensive areas. While statistics show that in 2023, 70.8% of Israelis owned an apartment, home ownership does not necessarily mean living in the purchased property. The north and south of Israel offer significantly lower property prices, and in some cases, the rent-to-value ratio is higher there, meaning that rental income from a purchased property in the periphery could help offset rental expenses in the center because you are earning a higher percentage of the value of your apartment than the percentage you are paying on your rental.

Buy Abroad and Rent in Israel

With home prices in Israel becoming increasingly unaffordable, Israelis often will look abroad to invest in property where the rent-to-value ratio is higher. In many foreign markets, rental income can generate better returns compared to Israel. Meanwhile, they can continue renting locally at a lower cost. In 2024 the average rent in Israel was NIS 4,717 per month, which was a 5.4% increase over the average in 2023 which stood at approximately NIS 4,477. However, before investing abroad, challenges such as currency fluctuations, foreign property regulations, and tax implications should be carefully considered before any decision is made.  Extra caution should be exercised when investing with a project sponsor in a syndicated investment where you are not purchasing a property directly in your name but rather as a group, as the risk level rises significantly when purchasing through a third party. 

Apply for Government-Sponsored Housing Lotteries

Israel’s lotteries for first-time homebuyers offer an opportunity to enter the housing market at a more affordable price. However, the number of available units each year is limited, making this an unreliable solution for most buyers.  But taking the time to research and join the lotteries is definitely worthwhile as the savings can be incredibly substantial while the cost and effort are minimal.  Check your eligibility online as you might be surprised to discover the timing from when you can participate.   For example, young couples from the time they are engaged can already join the lottery.  The government needs to significantly increase the number of available subsidized apartments if this initiative is to make a meaningful impact on affordability, but the numbers have been increasing with 2024 seeing a large increase in opportunities to win.

Wait for a Market Correction

Some potential buyers may choose to wait for a market correction. In the United States, housing prices are projected to decline over the next few years, as the impact of rising interest rates, low birth rates, and oversupply, among other factors, creates financial pressure on homeowners, forcing many to sell. Additionally, the aging baby boomer generation is starting to downsize, leading to an increase in available properties.

In Israel, the situation is different. A high birth rate, ongoing immigration, limited land availability, and global Jewish wealth seeking safe investment opportunities continue to drive demand. On the other hand, rising interest rates in Israel have also reduced the purchasing power for many home buyers. Buyers who secured attractive mortgage rates when interest rates hovered around 0%, are now struggling to afford their variable rate mortgages, which can lead to forced sales. Additionally, developers facing financial pressure have been offering incentives (e.g. 10-20% downpayments and the rest when completed), over the last few years to sell inventory leading to an effective 10-15% discount on apartments.  However, do the math before committing to any of these seemingly attractive, not to be missed, opportunities. Deferring a huge percentage of a payment sounds great in theory, but the balance will always need to be paid and you’ll need to afford your mortgage on a monthly basis.  Relying on prices to appreciate and then profit from a sale will only work if prices continue to rise, but that is far from a guarantee.