2020 Year in Review: The Israeli Residential Real Estate Market


With the onset of Corona in 2020 entire industries were thrown into turmoil. Some like Amazon made out like bandits with people literally ordering anything they could directly to their home while movie theaters and other entertainment venues basically went the way of the dodo. Zoom became a household name, albeit a slightly negative one depending on how many meetings you and your children had!

There were many prognostications about how the Israeli real estate market would react to a global pandemic, with some predicting gloom, while others a bonanza. Now that 2020 has ended, it is a good time to take a retrospective look at 2020 Israeli real estate trends, see some of the causes for these changes, and the impact it has on those looking to buy a home in Israel.


Investors changed focus.

Many real estate investors who previously looked abroad for real estate investment opportunities were literally grounded this year due to travel restrictions. However, they were still seeking investment opportunities and ended up looking internally to the Israeli real estate market. Additionally, there were investors who previously were involved in commercial real estate but amidst Corona and the downturn in commercial demand changed focus to residential spaces and buying homes in Israel. Many of them were not even looking into homes in Israel but even for residential land zoned to build a home.


Their cause was helped when the purchase tax was lowered to 5% for investors and not the previous 8%. Attractive investment opportunities always attract savvy investors. Introducing more buyers in an already crowded market was not helped by the fact that there were even less homes in Israel on market for sale, which leads to our next point.

Infrastructure Delays

The frequent closures experienced in Israel wreaked havoc on the building community, but not necessarily the real estate one. Generally, there is a constant gap between the demand for new homes in Israel and the availability. During Corona, this situation was exacerbated by the fact that there was an estimated delay in building roughly 20K-30K housing units. The decreasing supply, coupled with the increasing demand, led to an even further crunch in the market.

Buyers Revisited Priorities

It sounds cliché but the same type of life changing decisions that took place in many areas of the world also took place in Israel. People who once wanted to live as close as possible to, or in a city, were suddenly looking for alternative housing solutions with vast green spaces, large porches, more rooms etc. While the unemployment rates certainly rose dramatically during Corona many companies were conducting business, but, definitely not, as usual. With remote working becoming a necessity, and remote learning for school as well, families who could afford it went searching for opportunities to upgrade their home to something with more rooms, quiet spaces, alcoves, and or office space, to suit their needs. So, during 2020 there was an entire new set of buyers in the Israeli real estate market who may not have previously thought about buying a home.

Now one might say, "Aren’t these same buyers going to sell their current home’s as well?" We will cover the changes in rental tax another day but suffice it to say not everyone was selling, and for those relocating from a city, the demands in the city certainly weren’t as high as they were in towns and villages.

Goodbye “Mechir L’mishtaken”

Another factor to consider with the real estate markets changes was the end of the government sponsored “mechir l’mishtaken”, a service in which people could apply to win the rights to buy a new home in Israel at a lower price than market value. Again, this added an additional influx of buyers to an increasingly crowded marketspace.



Worldwide Unrest


We cannot discount the unrest and uncertainty emanating from Corona around the world and specifically the impact on world Jewry. More than ever, Jews, primarily from Western countries are considering Aliyah with the Jewish Agency reporting that even during Corona Israel absorbed 20,000 new immigrants. While some future immigrants may be waiting for the right time to move, they are not necessarily waiting to buy a home in Israel, in anticipation of their Aliyah. With the prevailing thought being real estate prices in Israel will always inevitably rise, people are buying even before they make the move. And with the current travel restrictions some of them are even buying "sight unseen" working through virtual tours and local real estate agents.


Future Outlook


It is always difficult to predict what will happen to the real estate market overall since demand varies so much in specific cities, towns, yishuvim, etc. The current shortfall in available homes will not be easily bridged. The Jewish agency is expecting 250K new immigrants in the next 5 years! Corona certainly bought its share of challenges for various industries and the real estate industry was no exception. It is hard to buy or sell a home in Israel when you are not allowed to venture into one!


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