Is it safe to buy property in Israel during security tensions?

To date, Israeli real estate has been able to weather all security crises and prices have never experienced a multi-year decline. Although as a result of some events there has been a temporary decrease in transaction volumes (on the order of one quarter), prices have nonetheless continued to rise year after year.

What tax benefits do Olim get when buying property?

Olim Chadashim get a substantial Mas Rechisha (purchase tax) discount on a sole-residence first home - typically 0% on the first NIS 1,978,745 and 0.5% above (subject to an annually-published Israel Tax Authority cap, eligibility within 1 year before to 7 years after aliyah, once per household lifetime). Foreign residents pay 8% on the first NIS 6,055,070 and 10% above, from the first shekel - there is no graduated relief and no 0% bracket. (Brackets frozen at January 2024 levels through 2027.) Verify the current year's ITA-published thresholds and your specific eligibility with a licensed Israeli tax advisor before signing.

Can foreign residents get a mortgage in Israel?

Yes. Many Israeli banks offer foreign residents mortgages. As olim (new immigrants) you are allowed to obtain up to 75% Loan to Value. On mortgages to foreign residents Israeli banks offer 50% Loan to Value. Mortgages can be fixed rate or variable rate.

What are typical rental yields in Israel?

Average yields on long-term real estate investment in prime locations in Tel Aviv currently range between 2.5-3.5%. In major locations such as Jerusalem, average yields are higher, ranging 3-4%. While these returns are low relative to some emerging markets, long-term appreciation of real estate capital is outstanding.

How long does the buying process take?

Most property purchases in Israel take between 2 to 4 months from the agreement to completion including all the due diligence and the Tabu purchase contract signing and registration.

Why Diaspora Buyers Are Choosing Israel, Even in Uncertain Times

Introduction

Usually every security alert makes the news, but in the real estate world, a large and growing trend is on the down low. Thousands of Jewish families from all over the world, from New York to Paris to London to Melbourne and more, are investing in real estate in Israel.

This is not ‘panic buying’. It is ‘purpose buying’ – i.e. people who wish to purchase a home in Israel for a variety of reasons, and today’s media are not dissuading them from their dream of owning a home in Israel for emotional, various and long-term reasons. And when one looks at the numbers, it is clear that when people are this committed to Israel, even numbers can’t stand in their way.

The Security Buyer Phenomenon

A peculiar type of property buyer exists in Israel’s real estate market: the so-called ‘security buyer’. These are often members of the diaspora who purchase property in Israel not because of a high rental yield or with hopes of profit on the value of the property over time, but simply to feel more secure in their ties to the country.

While many might expect foreign buyers to be deterred from purchasing real estate in Israel when the security situation turns bleak, numbers released by the Bank of Israel reveal that the foreign-resident owned property market has remained consistently strong throughout recent hostilities. Decades of conflict have become somewhat of a "business as usual" phenomenon in the Israeli real estate market, where even the worst of times is typically followed by a brief pause in transactions before activity returns to normal, and in many cases, is even elevated by the interests of buyers abroad.

The average Israeli national real estate price per square meter stands at around ₪38,000; here in Tel Aviv the price tag goes up to ₪55,000/m². Given the unusually high annual average growth of +4.8%, there is no denying that there is some powerful compounded growth at work here, far greater than most other asset classes. As with any investment, our advise would be not to treat your house solely as a short term gamble, but rather as a solid, long term hold, even if markets fluctuate.

What Drives the Decision

Understanding why people buy in Israel during uncertain times requires looking beyond spreadsheets. Three core motivations emerge consistently:

1. Identity and Belonging

For many diaspora families owning a property in Israel is not just a sound investment, it is also a way to manifest and tangify a deep connection to the country. Having a home in Jerusalem, Haifa or Netanya is for many more than just a physical asset - it is a symbol of roots, identity, heritage and continuity between generations.

2. Practical Preparedness

Anti–Semitism in parts of Europe and North America has become a reality check for many Jewish families; who would have ever imagined the days of "Safe" living in the diaspora. A home here in Israel offers a myriad of optionality – it’s always available for immediate occupancy, it can serve as a bridge for making Aliyah, or a summer home; or indeed as a valuable asset from which to draw on to assist children and their children for years to come.

3. Market Fundamentals

In light of various recent developments, it may be refreshing to remind ourselves that Israel’s economy remains robust and the case for real estate looks strong for a number of fundamental reasons, despite any recent and related volatility. While Europe languishes with anemic GDP, Israel’s performance has remained high. While the tech sector is somewhat depressed, other sectors in the Israeli economy are growing strongly, including the housing sector, driven by one of the most demographically dynamic countries in the world. All of these points, and more, present a strong case for investing in Israeli real estate.

Market Resilience: What the Numbers Show

Contrary to common assumption, real estate prices in Israel have never experienced a drop over a multi-year period. Unlike most developed countries, where property prices have declined in one or more such periods, here, they have consistently and steadily continued to climb. And this is true even in times of major security incidents, such as last winter, when one might have expected people to sell their homes at any price.

Long-term decline (5-10 year downturn), has never occurred in Israel
Price stability, avoiding the need for fire sales and "panic" selling prices
Post-event recovery: Returns to pre-stable levels generally, on average within the 1st quarter post-event
Renewed diaspora interest: security related events tend to boost long term demand from abroad

Our analysis for investors with a 5-10 year time horizon is that paying too much attention to security events is unlikely to add value; in the long run, timing tends to matter less and getting started is more important.

What International Buyers Should Know

Buying a place in Israel? Newcomers to the country don’t always know the basic financial rules of the game. We’re about to tell you what they are.

Purchase Tax (Mas Rechisha): Foreigners pay a stepped tax of 5-10% of the purchase price of the property. However, for the Olim Chadashim there is considerable relief from this tax. They can pay 0% on their first home up to a rather high threshold.

Total Additional Costs: There are also total additional costs to the price of the property of 5-12% - including lawyers’ fees (0.5-1.5%) and real estate agency fees (2%) as well as the Mas Rechisha.

Financing: There are mortgages for foreign residents issued by the Israeli banks. The LTV is 50% (as opposed to 75% for Olim) and you can choose between Bank of Israel’s prime rate or a fixed rate.

Rental Yields in Israel: Rental Yields on apartments in Tel Aviv currently sit between 2.5% to 3.5%, while other cities like Jerusalem and Haifa can boast between 3% to 4%, and possess great appreciation potential.

Making an Informed Decision

The most empowered buyer is the most informed buyer. Find out these vital statistics before you sign on the dotted line.

Explore locations – Israel has 159 plus cities all with different characteristics, a different price tag and growth potential. Don’t just equate startup activity with Tel Aviv and instead look into other cities like Herzliya, Netanya, and Haifa, or even Jerusalem to see which ones could be a better fit for your needs.
Use professional tools: There are a number of online tools you can use to compare the cost of a property in different currencies, such as mortgage and rental yield calculators, Mas Rechisha property estimators and currency conversion tools.
Know the law - Israeli property law is full of characteristics unique to this market that are different to Western countries.
Long-term buying: think generationally: Many security buyers are purchasing with an eye to the future – for a 20-30 year horizon. The property you buy today could be a home for your children or your grandchildren when they make Aliyah in decades to come.

Conclusion

Buying property in Israel during hard times is nothing new. And yet, there is something particularly special and even historic about real estate deals being made in the current unpredictable climate. The Israeli real estate market, notorious for its complexities and risk factors, is seen by locals and expats alike not as a difficult market, but as a home and therefore a secure investment in the long run.

Whether you are an Oleh planning to return to Israel, an investor seeking to add a new asset to an already diversified portfolio or a family seeking to purchase real estate connected to their homeland, the Israeli market offers a level of transparency, strength and long term fundamentals uncommon in other markets and geometrically higher returns on investment over the long term for the savvy buyer.