Rent vs. Buy: Housing Decisions for New Olim - A Comprehensive Guide for 2025
Making aliyah is one of life's most significant decisions, and choosing where and how to live in Israel ranks among the most important early choices new immigrants face. As a new oleh, you're navigating not just a new country and culture, but also a complex and dynamic housing market that has its own unique characteristics, benefits, and challenges.
Bottom Line Up Front: In the current 2025 market, most new olim should strongly consider renting for their first 1-2 years in Israel, taking advantage of government rental assistance while learning the market and establishing themselves financially. However, those with substantial capital (₪2+ million) and certainty about their long-term location may benefit from buying immediately, especially given the significant purchase tax exemptions available to new immigrants.
The Current Israeli Housing Market: What New Olim Need to Know
Market Conditions in 2025
Israel's housing market continues its upward trajectory despite recent economic and geopolitical challenges. Home prices have risen 0.6% in the past month and 7.8% year-over-year, showing resilience even amid a year marked by conflict. Notably, Tel Aviv saw the highest monthly increase of 1.2%, while Haifa led in annual growth with 11.7%.
The market fundamentals remain challenging for buyers:
Supply Shortage: The Israeli real estate market is expected to remain strong in 2025, with demand for housing continuing to outstrip supply. This demand is fueled by a growing population, especially in urban areas like Tel Aviv, Jerusalem, and Haifa, as well as the ongoing influx of immigrants (Olim) making Aliyah.
Rising Costs: The start of 2025 brought key fiscal changes. The VAT increase from 17% to 18% has slightly raised the cost of new homes. Additionally, municipal property taxes (arnona) have surged by 5.2%, the largest increase in 17 years, with Jerusalem homeowners experiencing spikes of 30-70%.
Record Inventory: By late 2024 the pipeline of homes for sale reached a record ~71,000 units (new apartments on the market). This provides more options but hasn't significantly dampened prices.
Rental Market Trends
Rental prices have also climbed, with new tenants paying 4% more than their predecessors and renewed leases costing 2.6% more on average. This has contributed to a 3% rise in the national rent index, intensifying concerns over affordability.
Despite rising rents, the rental market is likely to remain strong. Investors in rental properties could benefit from steady demand and rising rents, particularly in desirable urban locations.
Understanding Your Rights and Benefits as a New Oleh
Purchase Tax Exemptions: Your Biggest Financial Advantage
The Israeli government provides substantial incentives to encourage aliyah, with housing benefits being among the most valuable:
Current Purchase Tax Benefits (2025):
Tax exemptions for new immigrants (olim), who now enjoy reduced purchase tax on homes valued up to ₪6 million.
New olim and returning citizens are not required to pay tax on purchasing a home for up to NIS 1.9m. as of 2024, the attorneys explained, adding that tax beyond this amount is reduced by 0.5% up to NIS 6 million.
Eligibility for this benefit begins one year before aliyah and lasts for seven years afterward.
What This Means in Real Terms: For a ₪3 million apartment, a regular Israeli would pay approximately ₪240,000 in purchase tax, while a new oleh pays only ₪5,000 – a savings of ₪235,000 ($61,000).
Rental Assistance Programs
Rent Assistance: Olim are eligible for rental subsidies that range from ₪1,000 to ₪3,000 ($250–$800) per month, depending on family size and location.
However, recent changes have reduced these benefits: According to the new reform, new olim arriving in Israel from March 2024 will receive basic rental assistance of 363 NIS per month over two years, totaling 8,712 NIS.
Enhanced Benefits for Priority Areas: In addition, a new single oleh choosing to live in one of Israel's national priority areas will receive a monthly supplement of 973 NIS. Immigrant families settling in national priority areas will receive an additional supplement of 1,341 shekels, and single-parent families will receive a supplement of 1,500 shekels.
Additional Oleh Benefits
Arnona Discounts: Olim are customarily granted a discount of 70 – 90% (for up to 100 sqm.) on Arnona payments.
Income Tax Benefits: New Olim, who made Aliyah after January 1, 2022 (date inclusive), will enjoy an income tax credit over a period of 4.5 years.
Ten-Year Tax Exemption: The ten-year tax exemption exempts new immigrants and returning residents ("Toshavim Chozrim") who have lived outside of Israel for at least 10 years from paying Israeli taxes on income and assets sourced outside of Israel.
Mortgage Options for New Olim
Zakaut Mortgage Program
Israel's Ministry of Construction and Housing oversees a mortgage benefit program that assists new Olim in funding the purchase of a home in Israel. This is part of an Israeli government benefits program which is commonly referred to as the Zakaut mortgage benefit.
Key Features:
The interest rates are between 4-4.5% for a term of 20-28 years. The loan size is approximately 200,000 shekels so additional financing may be necessary.
For an Oleh to be eligible for the Zakaut mortgage, they need to secure the Zakaut mortgage within 15 years from their "Ma'amad Oleh," which is the date their Teudat Oleh was issued.
Standard Mortgage Terms
Loan-to-Value Ratios: For a mortgage on a First Property, the Lender can lend the Buyer up to a maximum of 75% of the purchase price of the apartment/house.
Income Requirements: In terms of income to be approved for a mortgage, the Lender requires the Buyer to have an income of three times the monthly mortgage repayment.
Current Rates: Rates are currently at or near all time lows – between 2% and 4% depending on the term of the loan, the loan-to value ratio, the borrower's creditworthiness and more.
The Case for Renting First
Advantages of Renting for New Olim
1. Financial Flexibility and Learning Period
Time to understand the market without rushing into a major purchase
Lower upfront costs allow you to preserve capital for other integration needs
Ability to take advantage of rental assistance programs
2. Geographic Flexibility
Freedom to explore different neighborhoods and cities
Ability to move closer to work opportunities as they develop
No long-term commitment while you're still establishing yourself
3. Market Intelligence
Kim Bash, founder of Kim Bash Real Estate, and "community matchmaker" working with new and would-be immigrants to Israel recommends that Jerusalem, Tel Aviv, Netanya, Ra'anana, Ramat Beit Shemesh, Modiin, and the Gush [the Etzion bloc, a cluster of Israeli settlements near Jerusalem, in the West Bank] (Efrat in particular) will continue to offer a soft landing for "anglo" [English-speaking] families.
Time to understand which areas truly suit your lifestyle and budget
4. Lower Risk During Adjustment Period
No exposure to market fluctuations during your first vulnerable year
Easier to reverse decisions if aliyah doesn't work out as planned
More liquidity for unexpected expenses or opportunities
Current Rental Costs by Region (2025)
Here are some average rental prices in 2025:
Tel Aviv Area:
1-bedroom: ₪5,000-7,000/month
2-bedroom: ₪7,000-10,000/month
3-bedroom: ₪9,000-14,000/month
Jerusalem:
1-bedroom: ₪4,000-6,000/month
2-bedroom: ₪6,000-9,000/month
3-bedroom: ₪8,000-12,000/month
Peripheral Cities (Be'er Sheva, Haifa, Ashdod):
1-bedroom: ₪2,500-4,000/month
2-bedroom: ₪3,500-6,000/month
3-bedroom: ₪5,000-8,000/month
The Case for Buying Immediately
When Buying Makes Sense for New Olim
1. Substantial Financial Resources If you have significant capital (₪2+ million), the purchase tax savings alone may justify immediate purchase. In my opinion, a full exemption from purchase tax should be granted for a first residential property, without a price cap, provided there is a commitment to residing in Israel for a predetermined number of years.
2. Location Certainty
You've thoroughly researched and are certain about your preferred area
Your profession or family circumstances tie you to a specific location
You have local connections providing reliable market intelligence
3. Market Timing Considerations property prices are projected to continue their upward trajectory, although at a potentially slower rate compared to the sharp increases seen in the past decade. If you believe prices will continue rising, immediate purchase may protect against future increases.
4. Long-term Commitment
You're committed to staying in Israel permanently
You want to establish immediate roots and community connections
Building equity is a priority over flexibility
Potential Purchase Targets for 2025
Peripheral cities and neighborhoods undergoing urban renewal projects present excellent opportunities for investors. These areas often offer lower entry prices and significant appreciation potential.
Emerging Areas:
Areas that are becoming increasingly popular for "anglos" and have more affordable real estate opportunities are in Katzrin, Nahariya, Pardes Hanna, Karnei Gat, Harish, Givat Olga, Hadera, Ma'alot and Karmiel.
High-Growth Potential:
The ongoing expansion of Israel's high-tech sector is creating new regional hubs, such as in Be'er Sheva, which could lead to increased demand for housing in these areas.
Financial Analysis: Rent vs. Buy Scenarios
Scenario 1: Tel Aviv Professional Couple
Background: Software engineers with combined income of ₪35,000/month, ₪1.5 million in savings
Rental Option:
3-bedroom apartment: ₪12,000/month
With oleh rental assistance: ₪11,000/month effective cost
Annual cost: ₪132,000
Arnona discount saves additional ₪8,000/year
Purchase Option:
3-bedroom apartment: ₪4.5 million
Down payment needed: ₪1.125 million (25%)
Purchase tax savings: ₪175,000 (vs. regular Israeli)
Monthly mortgage payment: ~₪12,000
Equity building: ~₪3,000/month initially
Analysis: Purchasing makes financial sense given their substantial savings and the significant tax benefits, provided they're certain about staying in Tel Aviv.
Scenario 2: Single Professional with Limited Capital
Background: Marketing manager, ₪18,000/month income, ₪400,000 in savings
Rental Option:
2-bedroom apartment in Jerusalem: ₪7,000/month
With rental assistance: ₪6,500/month effective cost
Preserves capital for other investments or emergencies
Purchase Option:
2-bedroom apartment: ₪2.8 million
Down payment needed: ₪700,000
Would deplete most savings
Monthly mortgage: ~₪8,500
Analysis: Renting provides better financial flexibility and allows time to increase savings while taking advantage of rental assistance programs.
Regional Considerations
Tel Aviv Metropolitan Area
Pros: Major economic center, high-tech hub, international atmosphere Cons: Most expensive housing market, high competition Best for: Tech professionals, entrepreneurs, those prioritizing urban lifestyle
Jerusalem
Pros: Cultural and religious significance, growing tech sector, diverse neighborhoods Cons: Complex political situation, more religious areas may not suit all olim Best for: Those seeking historical significance, government workers, religious families
Haifa and the North
Pros: Haifa: An up-and-coming city with a balanced lifestyle and relatively affordable housing. Cons: Fewer job opportunities in some sectors Best for: Quality of life seekers, retirees, those in maritime industries
Central Coastal Plain (Netanya, Ra'anana, Herzliya)
Pros: Anglo-friendly communities, good schools, beach access Cons: High prices in desirable areas, car dependency Best for: Families with children, professionals commuting to Tel Aviv
Peripheral Cities
Pros: Cities like Be'er Sheva and Ashdod are gaining popularity for their affordability and growth potential. Cons: Fewer amenities, longer commutes to major cities Best for: Young families, investors, those prioritizing affordability
Practical Steps for New Olim
If Choosing to Rent Initially
Research Rental Assistance Programs
Apply through the Ministry of Aliyah and Integration
Understand eligibility requirements and application deadlines
Consider priority areas for enhanced benefits
Choose Strategic Locations
Consider proximity to potential employment
Research public transportation options
Look for Anglo-friendly communities for easier integration
Negotiate Lease Terms
Understand Israeli rental law and tenant rights
Consider shorter initial leases (6-12 months) for flexibility
Factor in arnona costs and who pays utilities
If Choosing to Buy Immediately
Secure Pre-Approval
The mortgage process in Israel typically takes three to six weeks.
Gather required documentation before arrival
Consider working with mortgage brokers familiar with oleh cases
Understand the Market
if a person is buying a property from a seller (as opposed to a developer) the bank will demand that the Buyer hire an appraiser to review the property before approving a mortgage.
Research comparable sales in your target neighborhoods
Budget for all costs including legal fees, agent commissions, and renovations
Legal Considerations
Hire an experienced real estate attorney
Understand property registration and ownership rights
Ensure all purchase tax exemptions are properly applied
Common Mistakes to Avoid
Rental Mistakes
Not applying for rental assistance programs in time
Choosing locations based solely on familiarity rather than practical considerations
Signing long-term leases without understanding the local market
Purchase Mistakes
Rushing into purchases without understanding the market
Not factoring in all costs (maintenance, arnona, building committee fees)
Choosing properties based on comparison to home country rather than Israeli standards
Not understanding the resale market in their chosen area
Future Market Outlook and Strategic Timing
Expected Market Trends for 2025-2026
The sustained increase in property prices is expected to exacerbate affordability issues, especially for first-time buyers. However, government policies are likely to continue playing a significant role in shaping the property market with potential interventions to address affordability.
Key Factors to Watch:
Interest rate policies from the Bank of Israel
Government housing initiatives and construction projects
Immigration patterns and their impact on demand
Infrastructure development (Tel Aviv Metro, highway projects)
Strategic Timing Considerations
Best Times to Buy:
During your first year as an oleh (maximum tax benefits)
Market downturns (rare but offer better value)
When interest rates are favorable
Best Times to Rent:
Immediately upon arrival for market learning
During uncertain economic periods
When planning potential neighborhood changes
Special Considerations for Different Demographics
Young Professionals
Advantages: Time to build career and savings, flexibility for opportunities Recommendation: Rent initially in central locations, build savings, consider purchasing after 2-3 years
Families with Children
Priorities: School districts, community, stability Recommendation: Research school systems extensively, consider purchasing sooner for stability
Retirees
Priorities: Healthcare access, community, cost management Recommendation: Consider peripheral areas with good healthcare, may benefit from immediate purchase for stability
Entrepreneurs/Business Owners
Priorities: Business environment, networking, flexibility Recommendation: Central locations initially, maintain flexibility for business developments
Final Recommendations and Action Steps
The Hybrid Approach: A Recommended Strategy
For most new olim, a hybrid approach offers the best balance:
Year 1: Rent in your preferred area using rental assistance
Learn the market and neighborhoods
Establish income and employment
Build local credit history
Years 2-3: Assess and decide
If settled and financially stable, consider purchasing
Take advantage of remaining purchase tax benefits
Use market knowledge gained during rental period
Essential Action Items
Before Arrival:
Research rental assistance programs and eligibility
Identify target neighborhoods and price ranges
Secure initial rental accommodation
Understand mortgage pre-approval requirements
First 6 Months:
Apply for rental assistance
Explore neighborhoods extensively
Establish banking relationships
Monitor market trends and prices
6-18 Months:
Assess financial stability and income
Evaluate long-term location preferences
Consider mortgage pre-approval if buying is planned
Continue taking advantage of rental assistance
Long-term Strategy:
Maximize purchase tax benefits within 7-year window
Build credit history and savings
Consider real estate as part of broader investment strategy
Stay informed about policy changes affecting olim
Conclusion
The decision between renting and buying as a new oleh depends heavily on your individual financial situation, career stability, and long-term commitment to specific locations within Israel. While the significant purchase tax exemptions provide compelling financial incentives to buy, the practical benefits of renting initially—including flexibility, lower risk, and the ability to truly understand the market—make it the preferred choice for most new immigrants.
The key is to approach this decision strategically, taking advantage of the generous benefits Israel provides to new olim while maintaining the flexibility to adapt as you establish your new life. Remember that this decision isn't permanent—many successful olim rent initially and purchase once they've found their footing in Israeli society.
Whether you choose to rent or buy, the most important factor is making an informed decision based on your specific circumstances and the unique opportunities available to new immigrants in Israel's dynamic housing market. Take advantage of the resources available, seek professional guidance when needed, and remember that finding the right home is just one part of your broader aliyah journey.
This guide is for informational purposes only and should not be considered financial or legal advice. Consult with qualified professionals before making housing decisions in Israel.