Amid housing shortage, Apartments in Israel ‘flying off shelves’

Israel’s red-hot real estate market has been booming over the last several months, with demand for housing far outpacing supply.

HOUSING GOES up in the new neighborhood of Ramat Beit Shemesh Bet, 2019.  (photo credit: HADAS PARUSH/FLASH90)
HOUSING GOES up in the new neighborhood of Ramat Beit Shemesh Bet, 2019.
(photo credit: HADAS PARUSH/FLASH90)
Israel’s red-hot real estate market has been booming over the last several months, with demand for housing far outpacing supply. Increased immigration to Israel has exacerbated the problem, with new citizens and people thinking about becoming citizens looking for a dwelling in the Jewish state. As the competition to purchase property in Israel becomes stiffer, new trends are emerging, such as the willingness to buy a home sight unseen.
Rafi Shulman, co-founder of Olim Advisors, an organization that helps people make aliyah and find a home in Israel, says the prices of properties are skyrocketing because of the crowded real estate market.
“The prices of houses continue to increase,” he told The Media Line. “It’s just mind-boggling.”
“There is just more demand, specifically in certain areas, like Ramat Beit Shemesh for example, or Modi’in or Jerusalem, that are popular places for new citizens,” Shulman added. “We work with developers and we get the sense that they [apartments] are literally flying off the shelves.”
Ariyel Maresky, the owner of RE/MAX Vision in Jerusalem, the largest real estate company in Israel’s capital city with more than 30 agents, also says the real estate market is booming.
“I’ve been in the field for almost 20 years and I don’t remember such a high demand before,” he told The Media Line.
However, Maresky disagrees that housing prices are going up more than usual.
“Both in sales and rentals, we don’t really see a larger surge in prices,” he said. “Jerusalem has always increased 5% to 7% annually. I don’t think this year is any different.”
The impact of higher demand, Maresky contends, is that homes are sold and rented quicker. The process of buying a new home has sped up to the point that he will not take non-Israelis on as clients unless they are set to go forward immediately with a purchase.
New citizens are contributing to higher demand. Nefesh B’Nefesh said that immigration from February 2021-April 2021 has increased about 30% from the same time period in 2020. Some 256 new citizens immigrated to Israel in February 2021 compared to 154 during the same month in 2020; 179 moved in March 2021 compared to 104 last year; and 311 came in April 2021 compared to 26 the previous April. In 2019, the number of new citizens in Israel from February through April in 2019 was 131 in February, 178 in March and 164 in April.
Claudia Zalta, founder of Casa Zalta in Efrat and a licensed real estate agent who works with new citizens, says the coronavirus and antisemitism are contributing to more people looking to buy homes in Israel and in the West Bank.
“People are so desperate to come to Israel that they are buying homes without looking at them,” she told The Media Line. “They are scared to be outside of Israel because of antisemitism, and they feel that this is only the beginning and that it’s better to buy something now.”
As a result, Zalta says, people are willing to pay more than what a property is worth.
A real estate agent who declined to be named said some of his US clients have indicated that their desire to make aliyah is a result of the rise in antisemitic incidents and a poor response from the federal government.
In addition to new citizens contributing to higher demand for housing, Olim Advisors’ Shulman says people who are considering immigrating to Israel also have joined the packed Israeli real estate market in search of a residence.
“They might not be making aliyah in 2021, but they might be making aliyah in two to four years down the road, and they want to have a home here in Israel,” he said.
NEFESH B’NEFESH also has seen an increase in applications for Israeli citizenship in three out of the first four months of this year. In January 2020, there were 430 applications versus 759 in January 2021. Some 361 people sought citizenship in February 2020, as opposed to 446 in February 2021. Another 504 people applied this April, compared to 420 last year.
Liora Ben Ari, an independent real estate broker in Israel, notices the same trend of purchasing preceding citizenship in luxury vacation home transactions.
“It starts with a holiday home, and then after two, three, five, 10 years, they turn into olim,” she told The Media Line, using the Hebrew word for new citizens.
Maresky also has observed that foreigners are buying properties with their long-term needs in mind.
“Foreigners are buying as locals, looking to buy houses they will eventually live in,” he said.
In addition, Israelis have become interested in high-end real estate, which was once purchased mostly by people from abroad.
“Ten years ago, we treated the luxury market as an only foreign market, but now Israelis are participating,” Maresky said.
Rachel Golan, a Tel Aviv-based real estate agent, sells many types of properties, including holiday dwellings in northern Israel, close to the Sea of Galilee.
“There is a lot of interest in buying properties. With Israel’s borders slowly reopening, property owners selling to tourists earn a healthy profit,” she noted.
Jessica Watson, who is making aliyah from Denver on June 20, is starting out by renting an Airbnb in Tel Aviv for the summer.
“We want to be in Tel Aviv at least for the first year. We’ll see once we get to know the neighborhoods a little better and the areas around whether we want to live anywhere else,” she told The Media Line. “My husband is drawn to Jerusalem as well and I know they are not that far apart, so we’ll check out both areas and see what we like.”
Watson is also renting before buying because of the arduous process it takes to purchase a home in Israel.
“We have heard that it is not very easy to buy, that it’s a complicated process and we almost don’t know where to begin,” she said. “Of course, we would love to buy, because we bought a place in Denver but... we might not have enough resources to get that started.”
Lara Itzhaki, co-owner of Olim Advisors, says there are several challenges for new citizens to become property owners.
“Most people don’t speak the language,” she explained. “We guide people through the process to make sure they are dealing with reputable attorneys, going to good banks to get mortgages, to make sure they understand everything that is going on in the process.”
“The process is very different from what they’re used to overseas; they feel insecure,” Itzhaki added. “It’s probably one of their biggest life investments.”
It is common, therefore, for new citizens to rent first before even contemplating taking the plunge into home ownership.
Yossi Zoldan, who immigrated to Israel with some of his family in late April from San Diego, said he started out by renting an Airbnb. “I would eventually like to get my own place but I don’t have immediate plans to buy anything,” he said.
However, RE/MAX Vision’s Maresky says that securing a rental is also challenging because of the paucity of available apartments and houses to rent on the market.
“There is a massive shortage in rentals, they go in a day or two,” he said.
MARESKY SAYS that while last year cheaper apartments became available as students moved back in with their parents instead of leasing places near their universities, starting in June 2020, a sudden influx of Israelis returning from overseas filled up the available rentals.
Many people who were leasing apartments had to move out of their rentals when their lease was up during the period of the coronavirus, according to Maresky, and many of these former renters have decided they want to become homeowners.
In addition, short-term rentals turned into longer-term rentals last year with Israel’s tourism industry shuttered.
The shortage of rentals was so pronounced, Maresky says, that his company would not take on renters in January because there was nothing available.
However, for agents at smaller firms, like Gilia Posner, a licensed real-estate agent and founder of Dwellings in Jerusalem, the rental market has been steady.
“The rental market has been consistent. There are a lot of real estate agents in Israel whether it’s a rental or a sale. A lot depends on getting to the right property at the right time,” she told The Media Line. “Most of the time, the deals you close are with agents. Difficulty in selling/renting an apartment or home depends on the property. If it’s priced right, it will sell.”
As a result of more people looking to become property owners, new trends in the real estate market are starting to take hold.
“There is a new phenomenon that started during corona where people couldn’t come here and were buying off of plans or realtors, who would send clients pictures and videos of the property,” Shulman said. “There is definitely a much bigger set of people who are buying homes sight unseen.”
This is the case for D, who declined to give her full name, who purchased an apartment in Tel Aviv earlier this year without viewing it in-person before she immigrated to Israel from France.
“It was terrifying. After the purchase was [complete], I immediately thought, ‘What have I done?’” she recounted. “I’ve heard horror stories about Israeli apartments, and this is after people toured the place.”
“Thank God it worked out,” she added.
Another trend Shulman has noticed is the demand for higher-priced apartments by new citizens who are working remotely for the same employer they had when they lived overseas.
“Now, a lot of people can come to Israel and keep their American or Australian or UK-based job, which is often between two to four times higher than what the same job pays in Israel. They’re in a very good position because the cost of living as a percentage of what they’re making is now much less than it would have been with an Israeli salary,” he said. “People are coming with, in essence, higher incomes here so they can afford to buy more expensive homes.”
Maresky has also observed new developments in the real estate market, such as people looking for better homes and moving farther away from the center of town.
“Due to corona, people spend more time in their houses than ever and they’re looking to upgrade,” he said. “We see trends of people moving further out of the city,”
Looking to the future, independent broker Ben Ari says that demand is only going to keep going up.
“I feel in the past six months it’s been tremendously active. There are not enough properties to buy, whether it’s investors, people looking for holiday homes, new citizens, or Israelis looking to change addresses and not enough new builds going on the market,” she said. “I do believe there will continue to be an increase in demand to purchase.”