Itai Shance

The property ladder in Israel, explained

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Why is property here so expensive?

It’s no news that buying a home in Israel is no small feat. With limited land available, and constant demand, property prices are outright outrageous. Relatively low median wages in Israel, and high living costs, make it almost impossible for many Israelis to buy the home that they want to live in.

That being said, Israelis will do everything they can to put their name to a property, no matter how small, old, or out of town it is. Why are Israelis so focused on getting onto the property ladder and how does it even work?

What is the property ladder?

The property ladder is a step by step approach to being able to buy the home of your dreams (or something close). In realistic terms, it’s a method of increasing your purchasing power by buying your first property, and then slowly trading and upscaling and following the market until you have enough capital to buy a property you want to live in.

Real Estate – A solid investment avenue

Real estate in Israel is perceived to be one of the safer avenues for investment. As my grandfather always said, land is the only thing that can’t be imported. Between a growing population and constant demand from Jews abroad, property will always be an attractive thing to buy, and in fact a necessity. While the Israeli property market has good days and bad days, the fact of the matter is, that there hasn’t been a 10 year period in Israel’s history where real estate prices have not risen.

That being said, many people don’t believe we can afford property in Israel. They look at prices of apartments and houses in Tel Aviv, Raanana, Herzliya, and Jerusalem and lose hope in ever becoming homeowners. If you can relate, then I urge you to reconsider.

You see, with the property ladder, the idea is that if you can buy even something small, old, and out of town, it will climb in value as does the rest of the market, and over time, your small property will be worth more. And as time goes on, and your earnings increase, you will be able to upgrade your small apartment for a bigger one, and one day, you will be able to upgrade it for one closer to town. Eventually, with a lot of hard work and financial planning, you will be able to own a property that you want to live in.

A word about renting:

You might be wondering what you’re supposed to do with a property that you don’t plan on living in. The obvious answer is that you will rent it. The most common financial plan is to buy an apartment with a monthly rent that will more or less cover your mortgage costs and then rent that you pay for the home that you live in, will usually come out of pocket. These calculations aren’t easy and often rely on small margins. But for many, this is the most effective way to climb the property ladder.

So what now?

You might not be ready to buy a property now but there are still things you can do today which will give you a much clearer picture of what the future might look like. Go speak to these people if you want to get on the ladder but aren’t sure if you can afford it.

  • Go to the bank to see how much money you have in various accounts.
  • Speak to a mortgage broker to understand what the costs of different sized mortgages are.
  • Open Yad 2 and start looking for properties within your budget in areas that interest you. Check how much similar properties are rented for.
  • Start speaking to friends, family, real-estate agents, and people who know about the property market. It’s important to gain a solid understanding of the market (both buying and renting) before making a purchase.

I know that many people reading this article might not have the financial means to buy an apartment at the moment. My hope is that more and more Israelis and especially Olim, will understand how the property ladder can be used properly and to their advantage. And how eventually, they too can become homeowners in Israel.

About the Author
Itai Shance is an Israeli real-estate lawyer based in Herzliya. His office deals primarily with buying and selling properties in Israel, family wealth management, and land disputes. Since opening his office he has helped countless new immigrants purchase their first home in Israel.