Rental Income Now Covers Mortgage Interest in Most Israeli Cities
A significant shift has occurred in Israel's real estate investment landscape, with rental income now exceeding mortgage interest payments in 11 out of 13 major cities, a reversal from just two years ago. In July 2024, only in Beersheba did rent cover the interest on a 50% mortgage. Now, in most surveyed cities, rent surpasses this cost, driven by a combination of sharply rising rents, stagnant or falling property prices, and decreasing mortgage interest rates.
This analysis, cross-referencing rental data from WeCheck with property price data from the Central Bureau of Statistics, shows a dramatic improvement in investment viability. For instance, in Petah Tikva, the monthly deficit of 740 shekels in July 2024 has flipped to a surplus of 820 shekels, a gain of over 1,500 shekels monthly. In Herzliya, the gap has narrowed from a 2,300 shekel monthly shortfall to near parity. Similar positive reversals are seen in Netanya, Jerusalem, Ramat Gan, Ashkelon, Holon, and Ashdod.
The average rental yield has also improved. Between July 2024 and July 2026, yields increased in 11 cities, with notable jumps of around 20% in Netanya and Herzliya, 18% in Rishon LeZion, and 17% in Petah Tikva. However, the article cautions that even yields like 3.21% in Beersheba or 2.67% in Petah Tikva remain low compared to other investment avenues, explaining Israel's historical reliance on property value appreciation over rental income.
According to Rami Ronen, CEO of WeCheck, rising rents are a delayed reaction to previous price surges, exacerbated by a shortage of rental properties. He suggests that a yield of 3% to 3.5% is sufficient to attract many investors back to the market, a level now within reach in many areas. This shift could also influence the market for unsold new apartments, potentially leading developers to offer them for rent.
The analysis focuses solely on the interest component of mortgage payments and does not include principal, property taxes, maintenance, vacancy periods, or taxes on rental income above the exemption. While this represents only one aspect of investment costs, its positive turnaround after a prolonged negative period is considered a genuine market change.
