After a dramatic slowdown in Israel’s property market in 2023 — driven by rising interest rates and the Iron Swords War — new data from the Israel Tax Authority reveals an early rebound in 2024, led largely by investors and Diaspora Jewry. While overall transaction volumes remain below peak levels, Purchase Tax revenues rose 16% in 2024, and investment property prices surged, particularly among overseas buyers and new immigrants. The report sheds light on how international demand is reshaping market trends and contributing a disproportionate share of tax revenue.

A new report released by the Economic and Planning Division of the Israel Tax Authority reveals key trends in the Israel real estate market and taxation revenues between 2021 and 2024. The data highlights a significant slowdown in real estate activity that began in early 2023, deepened following the outbreak of the Iron Swords War, and began showing signs of recovery in mid-2024 — largely driven by investors and foreign buyers.

Tax Revenues Plummet, Then Rebound

Due to the sharp cooling of the market in 2023, revenues from real estate transaction taxes dropped substantially. Purchase Tax (Mas Rechisha) collections fell by 43%, while Capital Gains Tax (Mas Shevach) revenues declined by 49% compared to the record-breaking year of 2022. The downturn reflected a widespread freeze in market activity, particularly after the start of the war in October.

However, the first signs of recovery appeared in the second half of 2024. By year-end, Purchase Tax revenues had increased by 16% compared to 2023, signaling renewed buyer activity. Capital Gains Tax revenues, meanwhile, continued to decline but at a slower pace — just 5% lower than the previous year.

Investor Activity on the Rise

While much of the market remained stagnant, investor activity, particularly among those already owning a property, picked up significantly. After a modest price increase in 2022, the median price of an investment apartment rose by 11% in 2023, reaching 2 million shekels. The trend accelerated in 2024, with an additional 14% jump in the first half of the year, pushing the median investment property price to 2.3 million shekels.

Interestingly, this price growth was not mirrored in purchases of land, first homes, or upgrades by existing homeowners, suggesting that investment buyers — likely seeking stable assets or inflation hedges — have been a key force in the market’s partial recovery.

Olim and Foreign Residents Paying Far More

The report also highlights a striking gap in the prices paid by foreign buyers and new immigrants (olim) compared to veteran Israeli investors. In 2023, the median price of an investment property purchased by a new immigrant was 73% higher than the general median price for investment apartments. Similarly, foreign residents paid 71% above the market median.

Despite their relatively small share in the number of transactions — just 1% of investment purchases by olim and 10% by foreign residents — these groups had a disproportionate impact on tax revenue. Foreign buyers, in particular, paid full Purchase Tax with no exemptions or reductions, contributing 432 million shekels in 2023 — a full 15% of all Purchase Tax collected from investment property purchases that year.

Key Takeaways for International Buyers

For prospective foreign buyers and olim, the report offers several insights:

• Pricing Power: Foreign residents and new immigrants are paying premium prices, often well above local investor levels. This may be due to less familiarity with market norms, urgency, or preference for high-end areas.
• Tax Burden: Unlike Israeli citizens or residents who may benefit from exemptions, foreign investors are typically subject to the full 8-10% Purchase Tax rate for investment properties.
• Market Dynamics: With the broader market still stabilizing, investor-driven segments — particularly those influenced by international buyers — are leading the recovery and price increases.

As Israel’s real estate market adjusts to new economic and geopolitical realities, understanding these trends is essential for anyone considering a property purchase in Israel.