Data recently published by the Ministry of Finance indicates that despite a very high price level, Tel Aviv is the capital city in Israel for investment buyers. Next up are Haifa and Jerusalem, followed by Bat Yam in fourth place – to everyone’s surprise. Ashkelon, Eilat, and Harish also ranked high on the list. This year saw a 200% increase in the volume of real estate investment purchases compared to last year, largely thanks to the reduced purchase tax for investors.
What are the most popular cities in Israel for real estate investment? A report published in October by the Ministry of Finance’s Chief Economist Division answered this intriguing question and more. The report came against the background of a sharp increase in the amount of Israel real estate investment purchases recorded during the past year since Israel’s former Minister of Finance reduced the first purchase tax level from 8% to only 5%.
According to the numbers, investors made a total of approximately 2,600 transactions in July; that is three times the number of investment purchases made in July 2020, an increase of 80% from July 2019, and 20% of all real estate transactions made throughout the month.
Tel Aviv came in first place, by a wide margin
The survey of the most popular cities in Israel among real estate investors yielded interesting results. Despite the exorbitant prices, Tel Aviv-Yafo remains the undisputed queen for those looking to buy an investment property in Israel, with 270 properties sold to investors during the month of July. In Haifa, where apartments are much more affordable, investors made 180 purchases during the month. Jerusalem followed, with 170 apartments, and the coastal cities of Bat Yam and Netanya closed out the Top 5 with about 140 deals each. Be’er Sheva, which was previously considered the most popular city for real estate investments, dropped to #6 with only 120 purchases.
The most popular cities relative to their size: Bat Yam and Eilat
The analysis also compared the city’s popularity among investors in relation to its size. For example, Rishon LeZion, the fourth largest city in Israel, came in at #18 in terms of investor purchases, and Petah Tikva, the fifth largest city, ranked ninth. In contrast, Bat Yam is the fourth most popular city among investors, despite being the 15th largest city in the country.
Other cities in Israel where the volume of real estate investment was particularly high compared to the size of the city are Ashkelon, the twelfth largest city, but seventh most popular amongst investors, with about 100 purchases in July, and the resort city of Eilat, tenth place for investor acquisitions (about 60), despite being only the 37th largest city. The new northern city of Harish and Sderot, located close to the Gaza Strip, were also both mentioned in the report as cities with a high number of investment purchases compared to their size.
Tel Aviv is the most expensive, and Dimona is the cheapest
Not surprisingly, the most expensive city for investment properties is Tel Aviv-Yafo, with an average purchase price of NIS 5 million per apartment. Next in line is Netanya (NIS 3 million), followed by Herzliya and Kiryat Ono (NIS 2.9 million), and then Jerusalem (NIS 2.8 million).
On the other end of the list, the cities in Israel with the cheapest real estate investment transactions are Dimona in the southern periphery, with an average price of half a million shekels, followed by Tiberias (NIS 800,000), Sderot (NIS 900,000), Be’er Sheva (NIS 1 million), Kiryat Motzkin (NIS 1.1 million), and Haifa and Eilat (NIS 1.2 million each).
In 43% of the cities in Israel, the average price for apartments purchased by investors actually dropped from last year – a particularly surprising figure, considering that real estate prices jumped by almost 10% during this period. However, since a recent law reduced the purchase tax for apartments worth up to NIS 1.295 million from 8% to 5%, investors made a strong effort to stay within the lowest tax level. Therefore, despite the sharp increase in the number of real estate investment purchases made over the past year, the average cost of the properties purchased was actually lower than last year.