If you’ve been toying with the idea of buying real estate in Israel, either as an investment or to live in, now is a good time to start considering it seriously. Why? Because housing prices throughout the country have been falling steadily over the past year. Whether that’s good or bad for the Israeli economy is debatable; what’s not debatable is that buying a house in Israel is, at the moment, more realistic than ever.
Will Housing Prices Continue to Drop?
Finance Minister Moshe Kahlon has made it his goal to make housing more affordable, and he’s been the force behind falling real estate prices. While some experts say that prices will continue to decline, others say that the market is volatile and impossible to predict (especially in Jerusalem, as you’ll see below). Given the uncertainty of the situation, you can either decide to wait and see if prices continue to drop, or you can take advantage of the current low prices and make a purchase. Your decision will depend on your level of comfort, urgency, and budget.
Jerusalem Real Estate
While Kahlon is working on countrywide cost decreases, Jerusalem has reached an interesting point in history due to an unlikely player: The Greek Orthodox Church, one of the largest landowners in Israel. In the 1950s, the Greek Orthodox Church leased a large portion of land to the JNF for 99 years. JNF then subleased the land to Jewish residents, who bought apartments and currently live there. While the lease doesn’t expire until 2050, fifty years is suddenly seeming close, especially to the hundreds of Jerusalem families who stand to lose their homes when the lease is up.
While the Jerusalem government has reassured these homeowners that a solution will be found before then, real estate prices are plummeting. In fact, apartments on leased land currently cost 25-30% less than apartments on non-leased land. (Leased land includes areas in Rechavia, Talbia, Givat Oranim, and more.) What does this mean for potential real estate buyers?
If you believe that some sort of solution will be found, as the government has promised, you can now buy a home on leased land at a quarter of the current market value. If the uncertain situation makes you uncomfortable, you can look at housing on non-leased land. If you go the second route, you’ll have to deal with typical Jerusalem real estate prices, albeit at slightly lower numbers thanks to Kahlon. Even with slightly lower prices, you’re looking at a minimum of $500,000 for a 1-2 bedroom in central Jerusalem or a 3-4 bedroom in one of Jerusalem’s peripheral neighborhoods.
Located in central Israel, Ra’anana is a popular destination for new olim from the United States. In addition to its large Anglo population, the city has its own industrial park and is in prime position for commuters who need to get to Tel Aviv. In terms of real estate, the Ministry of Finance reported that housing prices in Ra’anana reached their peak at the end of 2016. Since then, costs have been decreasing slowly but steadily, partially due to Kahlon’s policies but mostly due to the creation of new neighborhoods in the city. When the development of these neighborhoods is complete (in about two years), prices are expected to rise again.
That means that now is a prime time to buy; however, it doesn’t mean that housing in Ra’anana is cheap. If you check out any Ra’anana real estate site, you’ll see prices ranging anywhere from 1.5-5 million NIS and higher, translating roughly to $416,000-$1.4 million at the current dollar to shekel exchange rate of 3.6.
Beit Shemesh has a population of about 110,000 people, and it’s mainly made up of English-speakers, Israelis, Ethiopians, modern orthodox, and ultra-orthodox. In the 1990s, the city saw a boom in the number of Anglo immigrants who settled there, while in the 2000s, many ultra-orthodox residents moved into the neighborhoods of Ramat Beit Shemesh. While Beit Shemesh is home to Jews of varying religious observance, it’s become known as an ultra-orthodox city, which is why many “yeshivish” families from the United States gravitate there when they make aliyah.
In addition to its reputation as an ultra-orthodox city, Beit Shemesh also has a reputation for relatively inexpensive real estate. Why are housing costs lower there? Mainly because:
- It’s not a major city like Jerusalem
- It’s not located in central Israel like Raanana
- It’s known as an ultra-orthodox neighborhood, which means that the demand for housing is lower than in other areas
For modern and ultra-orthodox families, buying real estate in Beit Shemesh is a good option; it comes with many religious institutions and the housing is much more affordable than Jerusalem. You can easily find a 5-bedroom apartment there for about 2 million NIS, while in Jerusalem 5 bedrooms cost at least double. For the time being, real estate prices are relatively steady, and will likely remain so unless the demographics change.
Staying Up to Date
If you’re interested in buying real estate in Israel now could be a great time. It is also a good idea to keep up to date on the latest real estate trends, including what’s going on with Church land in Jerusalem and Kahlon’s continuing policies. By keeping track of the Israeli real estate market, you’ll feel more confident with your decision to buy that dream home in the Holy Land.