Young Israelis Priced Out of Rental Market Amid Rising Costs

Rental prices in Israel are continuing to climb despite a slowdown in apartment sales, leaving many young couples struggling to find affordable housing. One couple, who moved from Tel Aviv to Kfar Saba in 2018 seeking lower rents, found themselves paying NIS 4,800 for a four-room apartment. Within three years, their rent jumped significantly, with annual increases of nearly NIS 1,000, reaching NIS 7,000, forcing them to deplete their savings to purchase their own home.

Experts attribute the rising rents to a shortage of available rental units, a decline in investor activity, and increased demand for apartments with safe rooms (Mamadim), especially after recent security events. The government is considering a tax reform that would eliminate the current tax exemption on rental income up to approximately NIS 5,600 per month, requiring landlords to pay taxes from the first shekel earned. While the Finance Ministry is also exploring a reduction in property purchase taxes for investors, industry insiders warn that taxing rental income could further inflate rents as landlords pass the costs onto tenants.

The decrease in investor purchases is a significant factor, with figures dropping from around 35,000 apartments bought by investors in 2022 to approximately 8,000 in 2025. This reduction in investor-owned properties, which often enter the rental market, has tightened supply. Additionally, high interest rates have made property investment less profitable, leading many landlords to sell their properties and seek safer investments like bank deposits or the stock market.

The demand for well-equipped apartments, particularly those with safe rooms, has intensified, driving up prices in this specific segment. While apartment prices have seen a slight decrease of about 5% in the past year, rental prices have risen by 4-5%, creating a significant gap. Unsold new apartments, estimated at around 86,000 units, are not entering the rental market, exacerbating the shortage. Urban renewal projects, which displace residents temporarily, also add to the short-term rental demand, further pressuring prices.

Experts suggest potential solutions, including canceling the additional property purchase tax for investors during the current market slowdown and offering tax incentives for landlords who commit to long-term rental agreements of five or ten years. These measures aim to stabilize the rental market and increase the supply of affordable housing, addressing the growing crisis faced by young families.