Real Estate Investment May Become Attractive Again Amid Shifting Market Conditions
Translated & summarized from Maariv by baba
Real estate in Israel may be poised for a comeback as an investment due to moderating prices, rising rents, and slightly lower interest rates. Expert Shahar Sinai highlighted that a 20% increase in current yield is possible with these shifts. However, Governor Yaron Amir warned that a resurgence in inflation and interest rates could keep safer investments more attractive, potentially delaying investor return to the housing market.
The story in 5 lines · by baba
- Real estate investment may become attractive again in Israel due to moderating prices and rising rents.
- A 20% increase in current yield is possible with shifts in apartment prices and rental income.
- Rising interest rates and inflation could keep safer investments like bonds more attractive.
- The Tel Aviv Construction Index has fallen approximately 17% since the start of 2026.
- Patient investors may see current real estate prices as a long-term opportunity.
A combination of moderating apartment prices, rising rental income, and a slight decrease in interest rates may be making real estate a more viable investment option in Israel once again. In recent years, many investors turned away from the property market due to rising interest rates, which increased mortgage costs and made safer investments like bonds and deposits more appealing. However, the current market shifts are prompting a reevaluation.
Real estate expert Shahar Sinai of Profund explained that a scenario where apartment prices decrease while rents increase can significantly boost returns. For example, a property priced at 3 million shekels with a 6,500 shekel monthly rent yields a gross return of about 2.6%. If the price drops to 2.7 million shekels and rent rises to 7,000 shekels, the gross return climbs to approximately 3.1%, representing a nearly 20% increase in current yield before leverage. Sinai noted that the attractiveness of real estate investment hinges on the gap between rental yields and potential property value appreciation compared to returns in safer assets.
However, the return of investors to the housing market is not guaranteed. Governor of the Bank of Israel Yaron Amir cautioned that if inflation resurfaces and interest rates remain high or increase, financing costs will stay elevated, keeping bond market alternatives attractive. Such a scenario could delay or even halt the potential return of investors to real estate.
The sentiment is also reflected in the stock market, with the Tel Aviv Construction Index falling approximately 17% since the start of 2026, and only 11 out of 48 stocks in the index showing positive returns. Despite short-term volatility, Sinai suggested that patient investors might view current real estate sector prices differently from a long-term perspective, as some real estate companies have historically provided high returns.
