It’s no secret that over the past two years, there has been an abrupt increase in both sales and rental markets in Israel. However, if we are to pinpoint exactly where these increases have had the greatest impact, it would probably be the city of Jerusalem. The prices have increased by 20% to 30% more recently. However, we should not forget that this surge has been going on for about a decade. This prompted people to spend a lot more time when looking for cheaper apartments and forced them to accept conditions that a while ago they probably wouldn’t have.

The rental industry is, unfortunately, no different. Most Diaspora residents are still choosing this option. It’s also worth noting that the financial investment has now become a lot less relevant for buyers. In fact, more and more people prefer to rent an apartment and enjoy the freedom of moving around whenever they see fit instead of being forever linked to a house.

But why is this surge in real estate prices happening? There are multiple reasons for it. The most important ones have to do with very low-interest rates, mortgages, inflation, and the severe shortage of housing units in Israel in general and in Jerusalem in particular. The latter is probably the most pressing issue that the government, the investors, and potential buyers are struggling with at the moment.

According to analysts, there are simply not enough housing units being built at the moment. On one side there are the investors who prefer to buy apartments and use them as investments. On the other side, there is a lack of resources for infrastructure. Preparing the terrain for building high-quality and durable housing units requires a lot of money, equipment, and time. At the moment, almost nobody is willing to offer that.

Just to give some examples, back in 2019, there have been 7.8% more apartments built in Israel than in 2020. Also in 2021, 53,000 apartments have been reportedly built. At the same time, the Central Bureau of Statistics claims that about 80,000 housing units are needed if the country wants to satisfy the buyers’ demands. This is no easy task to accomplish, especially considering all of the above. The situation for the year 2021 was even worse, with just 836 new housing units being built in Jerusalem. To make a comparison, in 2020 there have been 2,267 housing units being built in the city while in 2019 there have been 3,091 of them.