"Even from a global perspective, it is understood that Generation Z prefers to make quick money here and now in the stock market rather than invest in real estate. Israel must find a real solution to the long-term rental issue; many young people no longer want to buy apartments," says Yair Kaplan, CEO of Bank of Jerusalem, at the bank’s annual real estate conference.
In recent days, Bank of Jerusalem held its annual real estate conference in Ness Ziona, attended by hundreds of industry leaders. The bank’s CEO, Yair Kaplan, commented on the publication of the bank’s financial reports, saying: “In the last three quarters, the bank achieved record profits, which came from the successful implementation of a strategy that brings financial innovation in various areas. Among other things, since the beginning of the year, we have increased credit for supporting real estate projects by 30%. This demonstrates our strong confidence in the industry and the developers leading it.”
Regarding foreign residents, the bank’s CEO said: “The past two years have been challenging not only in Israel but also for Jews in the diaspora, with the sharp rise in anti-Semitism. We see growing interest from many Jews in purchasing homes in Israel, not only in Jerusalem but also in other cities, and we estimate that in 2026 this interest will translate into increased apartment purchases by foreign residents.”
Kaplan also addressed the issue of long-term rental projects, saying: “The return on an apartment in Israel is around 2%-3%. The interest rates in recent years have destroyed these plans; there is no value for developers. The state must make long-term rental projects financially viable, otherwise there is no real solution for young couples in Israel.
Additionally, the Bank of Israel will also need to support borrowers and help them cope with high housing prices and the high-interest environment, allowing mortgage terms to be extended to 35 years and increasing the financing rate for all-purpose mortgages to 70%. These changes will not increase banks’ credit risk; on the contrary, they will improve borrowers’ cash flow and support their (primarily psychological) need to purchase a home and meet mortgage repayments.”
Regarding the Bank of Israel’s interest rate cut two days ago and its effect on the real estate market, Kaplan said: “The real estate world is built on psychology. The current cut lowers the monthly payment by NIS 70, which does not really change the market. However, there is a change in the direction of the governor, who stated that he sees further cuts into 2026. We anticipate a 1% decrease in interest rates, which will bring it to 3.5% in a few months, which is much more significant. This will result in a saving of NIS 280 in the monthly payment, around NIS 80,000 over the total mortgage repayment, which will change sentiment and encourage apartment purchases.”
Kaplan added: “Tel Aviv is interesting. There was a time when everyone wanted to build there, and today it has completely reversed. It is easier to do transactions in the periphery. In Tel Aviv, especially in districts 3-4, the situation is not so good. It is harder to sell apartments, especially five-room apartments, which are almost not sold.
There are several reasons for this: prices are high for young couples (50-60 thousand NIS per square meter), excess supply, partly due to construction in Sde Dov and projects completed in the past year, mostly being sold by apartment owners. Today, there are 11,000 vacant apartments in Tel Aviv. The third reason is negative migration in Tel Aviv – it is estimated that 17,000 people have left Tel Aviv since the judicial protest until today.”
Regarding the "Price for Residents" program, Kaplan commented: “The ‘Price for Residents’ programs of all generations come from a good intention. We all have children whom we want to see with their own apartment. Unfortunately, these programs have not achieved their goal. In the world, when looking at housing programs, one of the first criteria for subsidies is an income test. Only in Israel do they look at whether you are married, whether you have children, and how many, without considering income. I hear about couples where one already owns an apartment, who don’t get married because once they do, they lose eligibility. People have been entering lotteries for years without success; this makes no sense.
Regarding the younger generation preferring to give up on buying an apartment, he said: “For them, an apartment is a consumer product, not an investment, mainly against the backdrop of the recent boom in markets where indices have risen by more than 100%. Tying up money in an apartment is old-school, and it also stops young people’s mobility – they no longer want to be fixed in one place.”