Rental Market Keeps Driving Price Increases as New Tenants Bear the Brunt

Israel’s rental market continued to outpace housing prices in May, with the housing services index, which tracks rent changes, rising 0.8% month on month. New tenants saw the sharpest jump, while the nationwide apartment price index rose only 0.3%, reflecting different trends in Tel Aviv, Jerusalem, and Haifa.

The people paying the highest price are those signing new leases or moving apartments. For them, rent was 6.8% higher than what previous tenants had paid, the steepest rise since October 2023. By contrast, tenants renewing annual leases faced a smaller average increase of 2.5%. The article says the average extra cost for new renters was about 270 shekels a month nationwide, and nearly 500 shekels in Tel Aviv.

The spike is linked to the summer rental season, which starts right after Passover, alongside the absence of a government rental policy, thousands of evacuees from war-damaged homes entering the rental market, and declining purchases by real estate investors. May followed an April decline of 0.1% in rents, while apartment prices had fallen 0.3% in March and April. Over the past year, apartment prices are down 1.3%.

Price trends varied sharply by region. New apartments, especially in Jerusalem and Haifa, accounted for much of the decline, with both districts down about 2%. Excluding units sold under the "Dira BeHanchala" program, new apartment prices fell 0.7% nationally. Tel Aviv, however, rose 0.7%, helped by a different buyer mix, about two-thirds of purchases between February and April were new homes, versus one-third in Jerusalem and one-quarter in Haifa. Tel Aviv and Jerusalem each have roughly 10,000 new units in supply, but Tel Aviv sells about 310 new apartments a month, almost double Jerusalem’s 170. In Haifa, where new-apartment supply has nearly doubled recently, developers appear more willing to cut prices.