Jerusalem Real Estate Market Report: Q1 2025
The Jerusalem property market demonstrated impressive resilience during the first quarter of 2025, building upon its reputation as one of Israel’s most distinctive and sought-after real estate environments. Transaction activity grew by 8.7% compared to the same period in 2024, reflecting continued demand across multiple segments. The average residential property price rose to ₪3,160,000 by the end of March, marking an 8.3% year-over-year increase. As Israel’s capital city, Jerusalem’s enduring religious, political, and historical importance continues to draw both local buyers and international investors, sustaining robust activity despite high prices and limited inventory.
Throughout Q1, approximately 1,390 residential transactions were recorded citywide. The average price per square meter climbed to ₪32,200, a 9.8% gain compared to the previous year. Properties moved faster than in the past, with an average time on the market of 78 days—nearly two weeks faster than Q1 2024. Mortgage activity remained strong, with approximately ₪4.1 billion in new residential loans issued, signaling that both end-users and investors remained active participants despite fluctuating financing costs.
Apartments dominated the sales landscape, with over 1,140 units sold at an average price of ₪2,830,000, an increase of 7.5% compared to Q1 last year. Townhouses continued to perform well in family-oriented areas, recording 88 sales with average prices rising to ₪5,400,000. The penthouse segment saw stronger gains, with 62 sales and an average price climbing to ₪7,850,000, reflecting a 13.9% annual increase. Sales of historic homes remained niche but notable, with 39 properties exchanging hands at an average price of ₪9,680,000, underscoring the continued allure of Jerusalem’s heritage estates. Land plot transactions also rose slightly, with 51 lots sold at an average price of ₪3,810,000.
Jerusalem’s diverse neighborhoods continued to show distinct pricing patterns. Properties surrounding the Old City achieved some of the highest values, averaging ₪10,780,000 per transaction, fueled by strong international demand. Rehavia and Talbieh maintained their status as premium residential areas, with average prices of ₪6,920,000 and ₪6,720,000 respectively. The German Colony, with its leafy streets and historic charm, saw homes trading at an average of ₪6,320,000, while Baka and Katamon remained attractive to family buyers, recording average prices of ₪5,200,000 and ₪4,810,000 respectively. In peripheral neighborhoods like Pisgat Ze’ev, Har Homa, and Gilo, prices remained significantly more accessible, with averages ranging between ₪2,150,000 and ₪2,400,000.
Several new residential developments continued to reshape parts of the city during the first quarter. Projects such as the Jerusalem Gateway Residences, offering luxury apartments near the city’s expanding business hub, reported sales of over 70% of their units at an average price of ₪42,000 per square meter. In the heart of the city, the Waldorf Astoria Residences saw brisk demand, with more than 80% of its ultra-premium units sold by March. Developments like Arnona Heights and Park Eight Jerusalem also contributed meaningfully to inventory, offering modern living options near established neighborhoods.
Urban renewal remained a major theme in Q1. Pinui-Binui initiatives were active across several areas, replacing aging residential stock with new, higher-density projects. TAMA 38 redevelopment projects also progressed steadily, particularly in areas like French Hill and Katamon, reinforcing existing buildings and adding new apartments. Efforts to preserve and repurpose historic properties were visible as well, particularly in neighborhoods like Nachlaot and around the City Center, where historic conversions created unique luxury residences.
The commercial real estate sector in Jerusalem also showed measured growth during the quarter. Office space transactions totaled around 68 deals, with average prices nearing ₪4,920,000 per property. Retail space continued to perform well, buoyed by strong tourism recovery and local demand, with an average transaction price of ₪5,820,000. Mixed-use developments attracted increased investor attention, with projects such as the Jerusalem Business District and the Gateway Business Hub showing robust pre-leasing rates. Hospitality assets, including boutique hotels and small inns, also recorded increased transaction volume, driven by the rebound of religious and cultural tourism.
Investment returns across residential and commercial sectors remained healthy. Apartments delivered an average rental yield of around 3.0%, with capital appreciation pushing total annualized returns to just over 10%. Historic homes, while offering lower rental yields at approximately 2.2%, continued to enjoy high appreciation, often exceeding 15% annually. In the commercial sector, office properties delivered solid returns averaging 4.5%, while retail investments produced slightly higher combined yields due to rising rental demand. Hospitality assets, given the surge in tourism, offered the highest returns, with average yields surpassing 6% and strong expectations for further growth through the year.
International buyers remained an important segment of the market. Roughly 27% of transactions in Q1 involved foreign nationals. North Americans continued to represent the largest share of overseas buyers, followed by French, British, and Australian investors. The majority of foreign buyers were motivated by a combination of religious ties, lifestyle aspirations, and investment potential, particularly in neighborhoods with proximity to historic or religious sites such as the Old City, Rehavia, and Baka.
Religious tourism, which has fully recovered and even exceeded pre-pandemic levels, played a significant role in supporting both residential and hospitality real estate demand. Areas surrounding major pilgrimage sites experienced renewed vitality, with boutique hotels and rental apartments seeing record bookings. Meanwhile, growing interest from the Christian and Muslim communities also bolstered transaction activity in traditionally religious districts, including around the Christian Quarter and East Jerusalem.
However, challenges persisted. Affordability concerns remained acute, as average property prices rose to more than 13 times the average annual salary. Preservation regulations, particularly in historic zones, increased project complexity and costs, limiting supply growth. Additionally, political sensitivities surrounding certain neighborhoods occasionally influenced buyer confidence, particularly among overseas investors less familiar with local dynamics.
Looking forward, Jerusalem’s real estate outlook for the remainder of 2025 remains positive. Prices are expected to continue their upward trajectory, with an estimated growth rate of 7–8% forecast for Q2. Transaction volume is projected to remain strong, particularly in areas benefiting from new transportation infrastructure such as the light rail expansion. New development activity will likely concentrate along key growth corridors, with an emphasis on mixed-use projects integrating residential, retail, and office components. Rental demand is anticipated to rise as well, driven by strong student housing needs, tourism expansion, and limited new supply in the central districts.
In the ultra-luxury market, properties priced above ₪8 million continued to perform exceptionally well during Q1. Approximately 80 transactions were recorded in this category, with an average sale price of ₪12.3 million. Notably, historic residences commanded a substantial premium, with many buyers paying up to 40% more for restored properties located in Jerusalem’s most iconic neighborhoods.
The rental market tightened throughout Q1. Average monthly rents rose to ₪8,200, reflecting an 11% increase from the previous year. The vacancy rate declined to 2.2%, and lease terms lengthened as tenants sought long-term stability amid rising costs. Mamilla remained Jerusalem’s most expensive rental neighborhood, with monthly rents averaging ₪16,300, followed closely by parts of Rehavia and the German Colony.
This report is based on detailed analysis of transaction data from January 1 to March 31, 2025, drawing from sources including Israel Land Authority records, the Jerusalem Municipality’s Planning Department, major real estate agencies, mortgage lenders, and construction permit filings. The data set covers approximately 1,390 residential and 215 commercial transactions.
Prepared by www.offplanisrael.com, this report offers in-depth insights into Jerusalem’s evolving real estate market. For tailored investment advice, market trend analysis, or property acquisition support, please contact them.
Disclaimer: This report is intended for informational purposes only. While efforts have been made to ensure accuracy, real estate markets are dynamic and conditions may change. Past performance is not necessarily indicative of future results.