Israeli real estate is not moving in one direction right now. It is splitting. The broad market is still weighed down by cautious local buyers, expensive financing, and a record stock of unsold new apartments. But in prime Tel Aviv, a narrower pool of overseas and high-end buyers is still closing deals at levels that would have looked aggressive even before the war. Not a broad recovery, but a selective one, concentrated in the safest, best-located, most liquid parts of the market.

Credible sources report that a French lawyer bought two adjacent apartments in a Tama 38/1 project on Michal Street in central Tel Aviv for about NIS 13 million, with plans to merge them into one future home ahead of aliyah. The combined area is about 167 square meters, with two balconies and two safe rooms, and the deal reflects roughly NIS 77,000 per square meter. Another Paris couple bought a four-room apartment in the Noga 1 project in north Jaffa for about NIS 8 million, or roughly NIS 69,600 per square meter, as a holiday apartment for now and a possible future move later. Media also cites fresh deals at Allenby 100, Ben Yehuda 105 and Herzl 91 at roughly NIS 94,000, NIS 81,700 and NIS 69,800 per square meter respectively, plus a NIS 5 million garden apartment purchase in Yad Eliyahu by an Israeli investor. In other words, money is still showing up, but it is chasing very specific product, central Tel Aviv, urban renewal, proximity to the sea or transit, and newer units with protected space.

From a real estate perspective, that matters because these deals can make Tel Aviv look hotter than the wider market really is. Foreign buyers are still a small slice of total activity nationally. Data cited from the Finance Ministry’s chief economist show foreign residents bought 433 apartments in the first quarter of 2025, less than 2% of all transactions, though that was up 37% from the unusually weak first quarter a year earlier. By October 2025, foreign-resident purchases were down to just 96 apartments, down 13% year over year, as the strong shekel and high prices worked against them. So the overseas story is real, but it is concentrated, not broad-based. It is strongest in prestige and lifestyle segments where a buyer is less sensitive to mortgage costs and more motivated by long-term relocation, family strategy, or simply securing a foothold in Israel.

The latest CBS housing-price release showed a 0.1% dip in national home prices in the December 2025-January 2026 period versus the prior two-month period, and a 0.9% decline year over year. In Tel Aviv District specifically, prices were down 2.8% from the same period a year earlier. At the same time, the fourth-quarter 2025 average home price in Tel Aviv still stood at NIS 3,360,600, by far the highest in the country, versus a national average of NIS 2,362,900. That is why selective high-end transactions can continue even while the district as a whole is under pressure, Tel Aviv remains expensive, but its submarkets are behaving very differently from one another. Trophy streets, boutique renewal projects and finished or nearly finished inventory are holding up much better than the broader field.

According to Finance Ministry data, total residential transactions in 2025 fell 11% from 2024 to 84,879, while new-home sales dropped 25%. At the end of December 2025, a record 86,090 new homes remained unsold. That inventory overhang has shifted bargaining power away from sellers in many places and created room for unpublished discounts, especially in parts of Tel Aviv where developers have brought a lot of product to market at once. Agents say that purchase prices in some Tel Aviv neighborhoods were already off by 15% to 20% from prior expectations, even as prime assets continued to trade. That is the contradiction shaping the market as headline luxury deals are happening, but they are happening inside a market that still has too much supply relative to domestic demand.

The Bank of Israel left its policy rate unchanged at 4.00% on March 30. In a separate review, the bank said roughly 69,000 mortgages were refinanced in 2025 for a cumulative NIS 43.6 billion, equal to about 7% of the banking system’s mortgage book, versus an average of around 4.5% in 2019-2024. About 15% of those refinancings involved extending the mortgage term, a sign that some households were looking for monthly cash-flow relief rather than just better pricing. The Bank of Israel has also warned about a rise in additional housing credit and payment structures that push a large share of the purchase price to delivery, because those deals can mask the real repayment burden on households. This is exactly why diaspora cash buyers and affluent no-financing buyers matter disproportionately right now since they can transact while ordinary Israeli households hesitate.

CBS says the average construction time for a building rose from 33.0 months before the war to 34.5 months after it began, and the bureau has estimated that the full war impact could add roughly six to eight months to construction timelines over time. The Bank of Israel has separately pointed to labor shortages, especially the drop in non-Israeli workers and the drag from reserve duty, as continuing supply constraints. In plain terms, a buyer today is paying a premium not only for location but for certainty that the project will actually get delivered, certainty that the building will include a safe room, and certainty that the asset will still be desirable if market conditions stay uneven.

Diaspora demand is not rescuing Israeli housing at the macro level. It is, however, supporting price discovery and transaction activity in a narrow but influential slice of the market, luxury and upper-middle prime stock in Tel Aviv and Jerusalem, especially where lifestyle, security, and future aliyah overlap. The broader market still looks slow, overstocked and financing-sensitive. But if you want to know where pricing power has not disappeared, look at central Tel Aviv, new or renewed buildings with protected space, and buyers who are writing checks for a long horizon rather than shopping for a mortgage.