The Israeli property market has witnessed a notable uptick in activity among foreign buyers, particularly since the outbreak of recent conflicts. This renewed interest has primarily been driven by religious communities, with Jerusalem emerging as a key focal point for purchases. Unlike the trend of past decades, where cities like Tel Aviv and Herzliya Pituach attracted significant foreign investments, today’s foreign buyers are predominantly choosing Jerusalem, favoring its unique cultural and religious significance.

December 2024 marked a record-breaking period for mortgages in Israel, with total loans reaching an unprecedented NIS 13.8 billion. This surge was driven by five key buyer demographics, including those purchasing apartments priced between NIS 2-3 million. These buyers often took out substantial loans, with nearly half securing mortgages exceeding NIS 1.2 million.

Another trend was the rise in “balloon” loans – mortgages with deferred repayment terms—which totalled NIS 3.2 billion in December alone, doubling the previous record. Real estate investors also played a significant role, with their activity levels reaching the highest since mid-2022.

However, one of the most intriguing developments was the surge in foreign buyers. This group, while still a relatively small portion of the overall market, has seen its activity increase dramatically, especially in Jerusalem’s luxury sector.

Historically, foreign buyers played a more significant role in Israel’s property market, with peak years in 2005-2006 seeing upwards of 400 transactions per month. However, factors such as the global financial crisis, rising property prices, and tax policy changes led to a steep decline. During the pandemic, foreign transactions dwindled to just dozens per month.

The tide has since turned. By 2024, foreign purchases had rebounded, with monthly transactions reaching approximately 150 apartments – a significant improvement compared to the lows of five years ago. Jerusalem has been the epicentre of this resurgence, with foreign buyers snapping up nearly 100 apartments per month in the city and its surroundings.

The demographics of these buyers reflect a shift toward ultra-Orthodox and religious communities. Many are purchasing homes as part of a long-term plan, driven by rising global antisemitism and the desire for a foothold in Israel. For example, projects like Israel Canada’s “Midtown” in Jerusalem have attracted substantial interest from American Hasidic communities.

Foreign residents have become a dominant force in Jerusalem’s luxury real estate sector. In November and December alone, they purchased 22 apartments priced above NIS 10 million, making up a significant share of high-end transactions in 2024. Notably, these buyers often seek new developments, contributing to the surge in mortgage activity at the end of the year as they rushed to complete purchases ahead of a VAT increase.

A senior mortgage banker noted that most foreign buyers hail from the United States, England, and France. While Americans and Britons tend to acquire properties as a form of security without immediate plans to relocate, French buyers are more inclined to move to Israel. The Tishrei holidays in September traditionally see a spike in purchases, reflecting a pattern of increased activity tied to cultural and religious visits.

While foreign buyers still account for a modest share of Israel’s property market – estimated at 2% of transactions in 2024 – their influence is growing, particularly in Jerusalem. As global uncertainties persist, this trend is likely to continue, reinforcing Jerusalem’s status as a prime destination for foreign investment and underscoring the evolving dynamics of the Israeli real estate market.

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