"A French Jew, a foreign resident, bought a house in Givat Hamivtar two years ago for NIS 2 million above the market price. When I asked him why he paid such a high price, he explained that in a year or two the prices would reach that level anyway, and that by bidding so high he was essentially saving himself having to compete. In retrospect, he was right, and prices reached this level very quickly. The reason? The entry of foreign residents into Givat Hamivtar caused prices to skyrocket. And that's how it is in many other neighborhoods in Jerusalem today," says Kobi Bier, a real estate appraiser, specializing in the Jerusalem real estate market.
Bier sees the purchases by foreign residents as an explanation for why prices in the capital continue to rise, at a time when they are falling almost everywhere else in the country, or at least not rising. He says, "I see no other explanation for this. Foreign residents have been buying more and more properties in Israel, ever since Covid. The war and anti-Semitism worldwide have intensified this, and the religious populations are of course looking for Jerusalem, and if in Jerusalem - mainly in the old neighborhoods: Rehavia, Talbiya, Baka, Katamon. And indeed, we are seeing a price increase primarily in these neighborhoods, and this is pulling the market upwards. They probably have enough weight to cause an overall price increase in the city."
The numbers reflect this well. The Ministry of Finance chief economist reports that in each of the last four months, about half of all purchases by foreign residents in Israel were in Jerusalem and its surroundings. The highest rate was recorded in September - 54%. In addition, the total purchases by foreign residents in Jerusalem in the first quarter of 2025 accounted for about 10% of all purchases in Jerusalem, while nationwide this rate was only 2%.
Central Bureau of Statistics data show that the Jerusalem District is the only districts in Israel in which a continuous price increase has been recorded in each of the last five months - a 3.6% cumulative increase. Since November 2024, there has been only one month in which there was a price decrease - May 2025 with a 0.9% fall.
"There are several factors for the increase in prices, but the most significant figure is that foreign residents, mainly from North America and Europe, are even more interested in purchasing properties in Jerusalem than in the past," says Yechiel Gamliel, Director of Marketing and Sales at the Beit Yerushalmi Group (BY). "Jerusalem has always been considered a city with sentimental value, and in recent years, with the political changes and the incidents of anti-Semitism, many are interested in purchasing a property there that they can move to if necessary. Recently, interest from foreign residents has been increasing, especially in neighborhoods in the city center."
"The strong demand from foreign residents has given a huge boost to prices in the city," adds Zohar Shriki, Partner and Manager of the Jerusalem Region at Magma, a company specializing in real estate marketing and urban renewal. "The city has remained the preferred destination for most of them, especially recently. They are looking for a refuge and an anchor, and in addition to wanting to be in Israel, they really want to live in Jerusalem."
"Jerusalem is differentfrom most cities in the country," says Alyssa Friedland, a broker at RE/MAX Vision who has been operating in Jerusalem for years, mainly in the luxury market. "In other cities there is enough inventory to serve those interested, but in Jerusalem the situation is different because there is no available land, especially in places where foreign residents are looking for apartments, and recently we have seen more and more interest from them.
"The comfortable foreign residents are looking for the center of Jerusalem, Ramat Eshkol, French Hill, Baka, Rehavia, Talbiya, the German Colony, Katamon - they prefer to live mainly there, close to the Western Wall, the Great Synagogue and the large communities that are already there. In these places there is new construction here and there, but not enough. The supply is not catching up with the demand, and this is pulling prices up. A seller who has an apartment within walking distance of the Western Wall knows that they have a small diamond in their hand."
"There is not a single house for sale in the center of Rehavia"
The issue of supply versus demand plays another important role in the rise in prices, the experts explain. Although Jerusalem is experiencing a construction boom that it has not seen in many years - between October 2024 and September 2025, for example, construction of 7,046 apartments began in the city, according to the Central Bureau of Statistics - but all of this, at least for now, is not enough, and certainly not in the high-end market. The result is the increase in prices currently being seen.
"Our feeling is that there is still no excess supply in the residential sector in Jerusalem, and there is certainly a shortage at the moment," says Bier. "It exists mainly in the luxury market. There, foreign residents are still looking for the special, old apartments, with oriental design, the kind that are only found in specific areas and the supply of this type of property is very limited."
"Foreign residents are looking for very specific apartments: a spacious penthouse, an Arab house, special properties," says Friedland, "and the shortage in this respect is great. There is no house for sale in the center of Rehavia, there simply is none. It almost does not exist, so when they find something like that, they are willing to pay a high price to get it. I have a waiting list of luxury home buyers, and I do not have enough properties to offer them. Every time I send a new property to my customer database, it is immediately sold. Luxury homes really do not stay on the market for long. There are buyers who are just waiting for them to arrive."
"Although there is planning for many housing units in Jerusalem, large numbers have not yet entered the market," explains Gamliel. "It still hasn't reached the existing levels of demand, so at this point in time, demand is greater than supply - and prices are rising. And if they are rising in the entire Jerusalem market, then in the luxury market it is even higher: compared to a 5% increase in the entire market in the past year, in the luxury market the increase is even reaching double digits. Jerusalem is a city with one of the highest densities in the country, so this is something that creates constant pressure on the residential market."
"When prices rise in the older neighborhoods, everyone starts to improve their housing," explains Bier. "Those who lived in older neighborhoods move more to the outer suburbs and then demand rises there too and it is gaining momentum. I can't say that prices are rising at the same rate in every neighborhood in the city, but prices are undoubtedly rising throughout the city."
Urban renewal
For several years now jerusalem has had a high rate of urban renewal. In 2024, for example, according to data from the government’s Urban Renewal Authority, it ranked first in the country in the field of demolition and reconstruction plans, both in approvals and in the granting of permits. This momentum also seems to have an impact on prices.
"The tremendous momentum in the sector is raising the value of properties in the old neighborhoods, such as Kiryat HaYovel and Kiryat Menachem," says Shriki, "and there is tremendous potential here for both investors and foreign residents, who recognize this. Many neighborhoods that are not in the city center are becoming more sought-after and more accessible - also because of the improvement in infrastructure, such as the expansion of the light rail and the opening of Road 16.
All of this, incidentally, is causing foreign residents to 'spread out' more than before. Today they are also buying in the high-rises, which are becoming increasingly common in Jerusalem, and are also being built in the old neighborhood of Arnona and Hebron Road. Many of the buyers in the new projects there are foreign residents."
Real estate agent Friedland notes that foreign residents have also studied the market and today know how to locate apartments prior to urban renewal, which they purchase for investment and know that they will receive major improvements.
She says, "A foreign resident from England bought a small, simple apartment in Rehavia, seven years ago, and put it up for rent. Two and a half years ago, he asked to buy another apartment, also small, simple and old. These two apartments are now before TAMA 38 (urban renewal plans), and so he will receive two larger apartments, with a separate building, with an elevator - it's as if he won the lottery. So, although not every apartment is snapped up, and there are apartments in Jerusalem that have been on the market for three or four months but if there is urban renewal on the horizon, there is no hesitation at all. Foreign residents also know that they should buy these."
"Jerusalem has fallen prey to high-rise buildings and urban renewal, and that also has an effect," says Bier. "Suddenly the city center offers modern residential homes 'in the center of the center,' and that means that Jerusalem is awakening in a certain sense. Towers are starting to pop up, mainly because there is no choice and Jerusalem has pretty much exhausted itself with existing land, and all of this is causing prices to rise. The additional cost is that in more and more places throughout the city there are more and more traffic jams and congestion."
The price rises will continue but not at the same pace
On the surface, it seems that the current reality is expected to continue, contrary to the nationwide trend, due to the aforementioned factors: strong demand from foreign residents, urban renewal that is raising property values ??even in old neighborhoods, and supply that is still not catching up with demand. Will price increases in Jerusalem continue in 2026 and beyond?
"I have been operating in the Jerusalem market for about 30 years," says Friedland. "In Rehavia, Talbiya, the German Colony and Baka, prices have only increased in the last 17 years. The last significant decline was perhaps during the second intifada (2000-2005). At most, there was a slowdown in the pace of sales, for example after October 7, but there is no way that there was a decline and I expect that to continue."
"As we move forward, there will be much more supply in Jerusalem," adds Gamliel, "many more apartments will come on the market, and in my opinion this will moderate the price increase for a certain period. Apartments that come on the market also provide an opportunity for buyers from the local market and Jerusalemites will always look for an apartment in Jerusalem. I think the momentum of the city's construction and development will also lead to positive migration of people who will come from the outer suburbs of Jerusalem and from the center of the country. I already know of such cases today, and this will increase."
Shriki also expects more moderate price increases in the near future. He says, "Already towards the end of 2025, we are identifying a certain moderation in the rate of increase, and I think 2026 will be a year of increases, but at a slower pace than we saw this year. Prices will continue to rise, but not as aggressively. We will also begin to see more supply in the field, and it will catch up with demand. This will create a certain moderation, but the increase will definitely continue in the coming years."
Published by Globes, Israel business news - en.globes.co.il - on January 6, 2026.
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