Israeli-Arab, Chinese Fill Construction Gap as Housing Market Booms

With an influx of foreign buyers and construction workers, the country’s real estate industry is on a fast rebound

After months of stagnation, the Israeli real estate market is now gaining momentum, fueled by an influx of Chinese construction workers and foreign buyers. Some of these buyers are seeking refuge from antisemitism in their respective home countries by investing in Israeli properties.

Israeli Economy and Industry Minister Nir Barkat said in an interview that around 60,000 foreign workers have arrived in Israel, many though not all, to support the local construction industry. This sector has been struggling since Oct. 7 because of Israel’s ban on the entry of Palestinian workers, who have traditionally dominated it. Instead, many new workers are coming from China, while others have arrived from Sri Lanka and parts of Africa and Europe.

“We’re open [to employees] from any country that is willing to send them, knowing that it’s peaceful and that we are not threatened by people entering the country,” Barkat said, admitting that “the economy paid the price” for banning Palestinian workers. Yet, he added, “I am a big strong advocate not to allow Palestinian employees to come to Israel because they are trained to kill Jews.”

Barkat said the country has had a deficit of about 170,000 workers since the war began. The government has since approved the entry of 130,000 foreign employees, of whom 60,000 have already arrived. However, not all the workers are in the construction industry, and bringing in workers from China could introduce its own risks.

Oren Cohen, CEO and founder of the Jerusalem-based Oren Cohen Prime Real Estate, explained that Arab Israelis are also contributing to the construction workforce, particularly in areas like Jerusalem, helping to fill the gap left by the absence of Palestinian workers.

Oren Cohen. (Courtesy)

Nonetheless, developers now have to allow at least six additional months to complete projects beyond their original timelines, said Yaniv Gabbay, co-owner and agent at Gabai Real Estate. Despite this adjustment, new housing projects and other real estate developments are beginning to get back on track—the question is, how long will it last?

According to data from the Israel Central Bureau of Statistics (CBS), from April 2023 to March 2024, Israel saw 62,800 housing starts. There were 173,700 projects actively under construction and 58,100 completed. Of the new starts, 68.6% were for sale, including 12% eligible for government subsidies. In the first quarter of 2024 alone, there were 16,000 housing starts and 11,900 completions.

The data also shows significant increases in housing starts across several regions: Jerusalem saw a 42.7% increase; Ashdod 126%; Lod 263.6%; Rehovot 433.8%; Tiberius 266.6%; and Hadera 109.1%.

Gabbay said that from October 2023 to the end of last year, there was a sense that the market was crashing—construction had stalled, and fewer people were buying. However, the market has since strongly rebounded.

“We as a company have seen record-breaking prices and a very healthy stream of sales,” Gabbay told The Media Line. “The first two-and-a-half or three months [after the start of the war] were on the quiet side. But things picked up when the situation settled toward January [2024], and we saw the floodgates open.”

Cohen estimates that sales dropped between 60% and 70% toward the end of 2023 during those first months after the war, especially among Israeli buyers. But as antisemitism has started to burn across parts of the United States, Gabbay said foreigners are making up for the increasingly more conservative Israelis.

“We find foreign buyers are looking for a property that they could potentially see themselves living in, not just a vacation apartment,” he added.

One of Gabbay’s roles now involves conducting extensive due diligence on developers for US clients, ensuring they invest in safe and suitable new construction projects. He also said he has observed a shift in the profile of buyers: whereas they were previously dominated by Modern Orthodox, Orthodox, and Religious Zionist Jews, property purchases are now being made by individuals from a broader range of affiliations and, hence, locations across Israel.

I have in my head a comment one of my clients made: ‘We are seeing antisemitism trending in the US, and that is promulgating us to purchase property in Israel.

“I have in my head a comment one of my clients made: ‘We are seeing antisemitism trending in the US, and that is promulgating us to purchase property in Israel,’” he relayed.

Cohen said most foreign buyers are acquiring high-end homes. In Jerusalem, this includes homes in areas like the Mamilla, Rehavia, and Talbiyeh neighborhoods. These popular areas have limited space and, consequently, their prices have increased due to high demand. Buyers, he said, are purchasing both move-in-ready existing homes and new homes expected to be completed within the next four years.

The HaShlosha project in the German Colony, Israel. (Courtesy Oren Cohen Group)

Gabbay agreed, saying that sales of classic one—or two-bedroom vacation apartments are lagging behind larger properties. He added that non-renovated apartments are also having a harder time being sold. He cited an example of a recent sale in the Baka area of an apartment that needed renovations—it took him eight months to sell, and he was sold for only 3% more than the price he would have gotten for it last year.

Gabbay explained that for foreign buyers, the purchase is more about “peace of mind,” knowing they will have a home in Israel if needed. One recent buyer sold a small three-bedroom apartment in Jerusalem’s city center to upgrade to a larger 4.5-bedroom penthouse in Talpiot. Though the buyer spent more money, the move made sense because he could envision living in the penthouse, unlike the city center apartment.

Gabbay noted that homes with private entrances and cottages are especially in demand, as they are the hardest to find in popular areas like Jerusalem.

On the other hand, Gabbay said fewer Israelis are buying – or even moving from apartment to apartment, which also impacts the rental market.

“Because of the war, people are not jumping to move,” Gabbay said.

The CBS showed that 3,690 second-hand apartments exchanged hands in April 2024, an increase of only 54% from the year before, versus 3,200 new apartments that sold that month, an increase of 118.6% from the same period a year before.

According to the CBS, some 6,890 apartments were sold in April, with 66,040 left to be sold this year. Generally speaking, the most popular areas for purchasing an apartment in Israel are Tel Aviv, central Israel, Ashdod, Lod, and Jerusalem.

When looking at the number of permits issued for building new apartments, the most popular area is Tel Aviv, which, from April 2023 to March 2024, received 17,680 permits to build new homes. Central Israel received 14,452 permits, while the South received 11,240, the North 10,056, and Jerusalem 10,847.

However, as the housing market continues to rebound, the agents said that prices are expected to rebound, too—and get even higher.

Cohen concluded that his advice to Israelis and foreigners was the same: “The sale today is the bargain of next year.”