Israel’s housing market has reached a dramatic turning point in recent years. Sharp price increases in the Tel Aviv metropolitan area and other high-demand locations have created a new reality: buying a home is no longer driven mainly by preference, but by financial ability.
Most Israelis are no longer buying apartments where they want to live, but where their equity and monthly repayment capacity allow them to buy.
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Many Israelis are buying homes based on what they can afford, not where they want to live
(Photo: Dana Kopel)
The result is a widening gap between the place people want to live and the place where they purchase property. Many choose to rent in the area where they want to build their lives, while buying their first apartment in an entirely different location. The choice is no longer between good and better, but between what is possible and what is slightly less possible.
A review conducted by Eldar Real Estate Marketing and obtained by Ynet and its sister publication Mamon found that more than 50% of homebuyers in Israel do not purchase property in the original location where they would like to live, but in a location they can afford. The finding is not a marginal phenomenon, but a broad pattern, and it is especially pronounced among homeowners looking to upgrade. The trend emerged from a review of about 700 buyers.
According to Roni Cohen, CEO and partner at Eldar Real Estate Marketing, “When it comes to housing upgraders, the compromise is even greater. Among first-time buyers, the compromise is accepted as a transitional stage. But for housing upgraders, it is a much heavier decision. The location of the apartment directly affects children’s education, employment, community and daily routine. And yet, they too are forced to give up the location in order to improve the quality of the property. To buy an apartment that is larger, newer and better suited to the family, they move farther away from the place where they would like to live.”
Roni Cohen, CEO and partner at Eldar Real Estate Marketing Photo: Eli YitzharFor example, the data show that more than 65% of buyers of large apartments, including five-room apartments, penthouses and special apartments, in new projects in Or Yehuda were originally residents of Kiryat Ono. In a dedicated survey conducted among them, 45% said they knowingly chose a new neighborhood that is somewhat removed from the center because it allowed them to afford the size they wanted, even if it was not their ideal location.
The reason is clear: price. A five-room apartment in Kiryat Ono currently sells for an average of about 4.5 million shekels, while a similar apartment in the Neve Ayalon neighborhood of Or Yehuda, only about 2 to 3 kilometers from Kiryat Ono, sells for about 3.5 million shekels. That is a gap of about 1 million shekels.
“In such a reality, compromising on location is not a strategic choice but an economic necessity,” Cohen said.
He added that “this is a national phenomenon, not a local one. Location spillover is not unique to the Ono Valley. A similar pattern can be seen between Rishon Lezion and Yavne and Be'er Yaakov, between Tel Aviv and Givatayim and Ramat Gan, and in the south between Beersheba and Ofakim. In all these cases, these are cities where sharp price increases have made it difficult for housing upgraders to remain in their preferred location and have forced them to expand the boundaries of their search.”
“The phenomenon creates a dual reality: families continue renting in Kiryat Ono, Tel Aviv or Givatayim because that is where they want to live, but they buy the apartment in Or Yehuda, Yavne or Ofakim,” he continued. “They live in one place and invest in another. The apartment they bought is rented out, and the rent they receive covers a significant part, or all, of the rent in the area where they want to live. Economically, it works. Emotionally? They still do not live in their own home. It may not be ideal, but it is a pragmatic solution.”
So what will happen in five to 10 years? Cohen believes some families that bought apartments in Or Yehuda or Yavne because of the price, while continuing to work and maintain their social lives in Tel Aviv or Rishon Lezion, will return later as second-hand buyers. Others, he said, will discover that they have grown used to the new area and will stay there.
“This phenomenon is changing the face of the housing market for the long term,” he said. “It also creates a real opportunity. Areas once considered the near periphery are becoming centers of demand, developing quickly and seeing upgrades in infrastructure and services. Families that bought three or four years ago in Or Yehuda or Yavne are already seeing an increase in value, so location spillover may be a compromise in the present, but an opportunity in the future.”
Assaf Simon, CEO of BST Development, reinforced that view.
“In recent years, there has been a noticeable shift in the way households make housing decisions,” he said. “In the past, the starting point was where they wanted to live. Today, the central question is where they can afford the deal. The rise in housing prices in central Israel, along with uncertainty around the interest-rate environment, has created a gap between the desired and the possible, leading more families to expand their search boundaries to more accessible areas.”
Assaf Simon, CEO of BST DevelopmentPhoto: Arik SultanSimon also referred to the widening of tax brackets that is set to take effect in 2026. He said the move could increase households’ disposable income by hundreds of shekels a month, or thousands of shekels a year, affecting mortgage repayment capacity and the scope of available financing.
“When combined with local tax benefits, such as the approximately 12% benefit for residents of Nof Hagalil, an economic package emerges that strengthens the viability of moving to and investing in northern cities,” he explained. “While rental yields in central Israel are around 2% to 3%, in cities in the north, for example, yields of 3% to 4% and even higher can be seen.”
According to Simon, “A housing or investment decision today rests on a broader set of economic considerations, including price, financing, taxation and growth potential. At the same time, movement can also be identified on the employment side. Low unemployment rates and competition for quality manpower are leading businesses to consider expanding to additional areas.”