Rents rising in Israel but not everywhere

Amid the unrelenting rise in rents, “Globes” finds neighborhoods around the country where rents are actually falling.

Average home rents in Israel have been steadily rising for several years. In the latest price index published by the Central Bureau of Statistics for July 2026 rents stood out. Rents for tenants renewing their leases rose by 2.6%, while rents for new tenants (in apartments where a change of tenancy occurred) rose 4.7%. However, a less uniform picture emerges when examining the situation in specific areas.

"The Israeli rental market is not a monolith but is composed of hundreds of 'micro-markets.' In certain areas, we are seeing a temporary glut of new apartments. While this is not a new phenomenon, it is certainly more pronounced and widespread today," explains real estate marketing firm Snir Group CEO Nir Shmoul, CEO, who is also CEO of the Urban Development and Renewal Company.

According to Shmoul, "Field surveys we conducted clearly reveal this trend in several areas. A striking example is the Ramot Yoram neighborhood in Netivot, where we identified about 56 apartments listed for rent simultaneously. This situation has resulted in asking rents that are 300 to 500 shekels per month lower than the realistic market rate." "Another example is the Nuriyot neighborhood in Rishon LeZion, where a large number of apartments were built simultaneously. Currently, nearly 80 apartments are available for rent there, and prices, compared with previous months, reflect a drop of NIS 300 to 600 shekels per month."

Thus, despite at least three years of steadily rising average rens in Israel and growing demand for rental units driven by high purchase prices in the housing market, there appear to be several locations experiencing a temporary oversupply. This, in turn, is forcing landlords to make concessions, including lowering their asking rents.

The examples cited by Shmoul in Netivot and Rishon LeZion are just two among many; areas with a large supply of rental units can also be found in Jerusalem, Modi'in, Petah Tikva, and elsewhere. In all these cases, the phenomenon is localized, in specific areas where such a supply has emerged for various reasons and is temporary, lasting only until the market "absorbs" the excess inventory.

"The Mordot Arnona project in Jerusalem is a prime example of a situation where the concentrated delivery of apartments instantly creates a new market," adds Ravit Karoudo, owner of Ravit Nechasim - an agency specializing in the Arnona neighborhood and southern Jerusalem and a member of the city's real estate brokers' association.

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According to Karoudo, "The project increased the number of apartments in the Arnona neighborhood by more than 50%. This includes 778 units built in the government subsidized program for first-time buyers, as well as long-term rental apartments purchased on the open market for investment purposes.

"The Kiryat HaYovel neighborhood in Jerusalem is another area worth looking at in this context. 130 apartments have already been occupied in the first phase of the HaYovel Boulevard complex, and occupancy has now begun in an additional complex comprising 226 apartments. A separate complex featuring hundreds of long-term rental units has also been built in the neighborhood, while additional projects - 425 apartments on Hantke Street and 146 on Uruguay Street - are moving forward, alongside thousands of units currently in various stages of planning and approval."

The factors

From urban renewal to long-term rentals

The aforementioned examples illustrate the "glut" currently in some neighborhoods, but what is causing it and is it more common than in the past?

Shmoul says, "We are identifying this phenomenon of a temporary 'glut' of new apartments in three types of locations. Firstly, in new neighborhoods with large-scale construction of thousands of units marketed primarily through pre-sale campaigns aimed at investors. Secondly, in high-density, government subsidized projects, where many winners don’t plan to live in the apartments themselves but instead put them on the rental market, while renting other properties for their own use. And thirdly, in large urban renewal projects, where a significant portion of the owners of the new 'replacement apartments' are actually investors who purchased the original units in anticipation of the urban renewal process. On receiving the keys, they simultaneously release these units for rent or sale. The completion of long-term rental projects also introduces dozens more rental units onto the competitive landscape."

Israel Realtors Association chairman Itzik Levy adds, "The phenomenon of a localized 'glut' of apartments is indeed real, and several factors are driving it. For instance, consider a specific point in time when a large project or several new buildings receive their 'Form 4' (occupancy permit) simultaneously, or when a large volume of long-term rental homes hits the market as recently happened in Jerusalem’s Moradot Arnona neighborhood. In the context of urban renewal, at least for the time being, this occurs less frequently, since a major portion of apartments return to the original owners."

"In a small urban renewal project involving just one building, usually only a few apartments are added," agrees Karoudo. "In TAMA 38 earthquake strengthening projects, the new apartments are typically on upper floors and marketed at relatively high prices. Consequently, the impact on the local rental market is limited. The picture changes with large-scale urban renewal projects, demolition and rebuild developments spanning multiple complexes, or the development of an entirely new neighborhood. When hundreds of apartments are handed over within a short timeframe and a major share of them are for rent - a localized supply bubble can certainly form."

The impact

Lowering rents or adjusting expectations

What happens in a neighborhood, or even on a specific street, when the supply of available units suddenly surges by tens or even hundreds of percent? It begins with landlords struggling to find tenants - certainly at rents they previously commanded, and can lead to actual rent reductions, at least for a time.

"When dozens of apartments in the same building or complex hit the rental market simultaneously, direct competition arises among landlords," explains Levy. "Every month an apartment sits empty represents a direct loss of about 8.3% of the total annual rental income.

"Consequently, landlords prefer to compromise and show flexibility on pricing, lowering the rent by 5% to 10%, to secure a tenant immediately and avoid months of non-occupancy. This dynamic becomes even more pronounced after the peak summer season (July-August), when landlords face lower demand and greater price flexibility is required to close a deal."

"Landlords are certainly forced to cut rents," adds Shmoul. "When dozens of nearly identical apartments are handed over at once in the same neighborhood, or even on the same street, intense rivalry breaks out among dozens of landlords vying for every potential tenant." To avoid leaving their apartments empty, landlords are forced to compromise on rent, with drops reaching 5% or more.

"Most landlords in this situation opt for a short-term, one-year lease at the reduced rate, intending to raise the price back up once the period of oversupply and those initial contracts come to an end."

Caroudo views the situation somewhat differently: "It is important to distinguish between a drop in prices and an adjustment of expectations to match what the market is willing to pay," she says. "Take the Mordot Arnona project, for example. Some landlords there expected rents similar to those in the well-to-do Arnona neighborhood, but tenants quickly distinguished between the two areas.

"Today, apartments in Mordot Arnona have their own rent structure. For 4-room apartments, for instance, most asking prices in Mordot Arnona range from NIS 7,400 to 7,900, whereas comparable apartments in the more established parts of Arnona typically go for NIS 8,000 to 9,000. The gap here can approach 10%. A landlord who sets the rent too high may need to lower it by 5% to 10%, and sometimes even more."

The impact on the overall market

"A marginal and temporary phenomenon that is not widespread"

At a time when apartment rents keep climbing, people are actively scouring the market for places where prices are actually dropping and they might find them in specific locations where the market is suddenly flooded with available apartments.

But does the fact that this phenomenon is more common today have a significant impact on the market as a whole? Here, the consensus is clear: the impact does not extend beyond the specific complex, street, or neighborhood.

"On a general, nationwide level, Israel's rental market is characterized by demand exceeding supply, and rental prices have continued to rise in recent months," says Levy. "The impact of a sudden influx of apartments in a specific location is highly localized, and the overall trend remains upward. This localized oversupply does not alter the citywide or national market. Price discounts or concessions remain confined to those specific complexes experiencing a temporary surplus. It is a marginal and temporary phenomenon that, as of now, is not widespread. "I do not view this as a broad-based decline in rents, but rather primarily as a correction of initial pricing that was out of sync with the market. When dozens of similar apartments compete for the same tenant, the market makes the reality clear to the landlord quite quickly."

"This is a localized phenomenon affecting a specific neighborhood or complex experiencing a supply glut and has no bearing on the broader market," adds Shmoul. "Since we are dealing with new apartments in developing areas, the available inventory is 'swallowed up' and absorbed by the local market within a few months. Once the surplus inventory clears, prices in the area resume their upward trend. Consequently, these temporary supply 'bubbles' do not truly impact the macro picture of rental prices nationwide, or even the citywide average."

Caroudo further notes that in the long run, those new apartments, which may "flood" a specific area at a given moment and potentially drive temporary price drops, can actually benefit the area and its image in the future.

As she puts it, "Past experience shows that new areas, initially distinct and lower-priced, gradually integrated into the surrounding neighborhoods and even elevated their status. This happened in the Arnona Hatzira neighborhood, for example. In the long term, new construction brings in new residents, commerce, educational institutions, and infrastructure, while also highlighting the shortcomings of older buildings. It can actually strengthen an existing neighborhood."

Published by Globes, Israel business news - en.globes.co.il - on September 17, 2026.

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