Rent Surges Sharply in Tel Aviv as Home Prices Barely Move

Israel’s rental market continued to tighten in May, with the housing services index rising 0.8% and rents for new tenants jumping 6.8% compared with the previous renters, the steepest increase since October 2023. In practical terms, that meant an average monthly rent increase of about 270 shekels nationwide, and close to 500 shekels in Tel Aviv. Tenants renewing existing annual leases saw a smaller, but still meaningful, 2.5% increase.

By contrast, the housing price index was almost flat. For March-April, it fell 0.3%, and over the past year home prices declined 1.3%. The article says the gap reflects very different conditions across Tel Aviv, Jerusalem, and Haifa, with the sharpest drops in new apartments in Jerusalem and Haifa, both down about 2%.

The rent spike was attributed to the seasonal summer surge that begins after Passover, which this year fell in April, plus broader market pressures. These included the government’s lack of rental policy, thousands of evacuees from war-damaged homes entering the rental market, and reduced purchases by real estate investors. April had actually seen a 0.1% decline in rents.

In Tel Aviv, the housing price index rose 0.7%, helped by the fact that two-thirds of apartment purchases there between February and April were new units. In Jerusalem, only one-third of purchases were new, and in Haifa just one-quarter. Nationally, new-home prices excluding “Buy an Apartment at a Discount” sales fell 0.7%, more than twice the overall index, suggesting that most of the decline came from new apartments. Tel Aviv’s market is driven by wealthier buyers able to pay around 5 million shekels per apartment, while Jerusalem’s market is split between wealthy foreign buyers and a lower- to middle-income local market. In Haifa, rising supply, which nearly doubled in recent months, appears to have pushed developers to cut prices.