Renting in Israel: 2026 Rents, Yield and Taxation

Investing in a new property to rent out remains a common strategy in Israel, whether you are buying from abroad to prepare a future pied-à-terre or you are already living in Israel and want to supplement your income. The latest rental data, published at the end of September, shows a rental market that has grown year-on-year but is clearly segmented according to the size of the properties. Before calculating a return, it is also important to understand rental taxation, which has a significant impact on the final outcome.

Rents in August 2026: The National Snapshot

According to Nadlan Center, based on data from the WeCheck platform, the average national rent stood at 5,063 ₪ in August 2026, down 0.8% over the month but up 3.7% year-on-year. The total number of listings reached 16,172, a slight increase of 0.7%.

Source: Nadlan Center, WeCheck data August 2026.

Small or large units: two opposing trends

The contrast is striking. For large apartments, supply jumped by 15.2% in one month and the average rent fell by 2.1%. For small apartments, supply contracted by 6.3% and rents remained stable. For investors, this suggests that 2- and 3-room units, which are more affordable, continue to see strong demand. This is confirmed by a major listings portal cited by Globes, which notes renewed interest in 3-room apartments.

Over the past year, the differences by city are significant: according to the same source, rents increased by 7.4% in Jerusalem, 3.6% in Tel Aviv-Jaffa, and only 0.7% in Ashdod. See our Jerusalem and Tel Aviv guides to locate new developments in these markets.

From Rent to Yield: Key Benchmarks

Gross yield is calculated by comparing the annual rent to the purchase price. However, a thorough calculation includes the full acquisition cost: price including 18% VAT, closing costs ranging from 10 to 13% depending on the items, and purchase tax. You must also consider vacancy, maintenance, arnona depending on the lease, and the cost of the loan.

For example, the average price of a property in Tel Aviv reaches 3.58M₪ according to data compiled by the Times of Israel. Thus, the gross rental yield remains modest compared to national average rents. On the financing side, the review published by Nadlan Center indicates that the average loan for an investment rose from 1.17M₪ to 1.37M₪ in one year, and that the weighted average nominal rate reached 4.38% in August. The Bank of Israel, for its part, lowered its key interest rate to 3.25%. Test your assumptions with our financing simulator.

Rental Taxation in Israel: The Three Regimes

Residential rental income in Israel can fall under three regimes. These are general principles and should be confirmed with a tax advisor for your situation.

Exemption Under a Threshold

Residential rental income can be exempt as long as it remains below a monthly threshold, which is revised each year. Beyond this, the exemption is gradually reduced.

The Flat 10% Rate

The owner can choose a 10% tax on gross rent, with no deduction of expenses. This regime is simple and often chosen for high rental amounts.

The Marginal Regime

The rent is then taxed according to the progressive scale, but expenses are deductible: loan interest, depreciation, maintenance. This can be relevant for an investment that is heavily financed with credit.

For a non-resident, the applicable regime and how it interacts with the tax system of the country of residence should be validated with a tax advisor. This is a key point for buyers from abroad.

The Purchase Tax for an Investment Property

A property bought in addition to a primary residence is subject to a separate Mas Rechisha scale, which is much less favorable than that for a sole residence. The amount depends on your profile: residency status, ownership of other properties, and resale timing. Our guide on Mas Rechisha explains the main principles, and the taxes and fees calculator provides an initial estimate.

Our Method for Rental Investment

Choose the size of the property based on local demand, include all costs in the final price, compare tax regimes, and check financing options. The team you need remains the same: lawyer · broker · architect. The lawyer validates the contract and tax treatment at signing, the broker optimizes the mortgage, and the architect ensures the layout will be easy to rent. For more on financing, read our article on the increase in real estate loan volume.

IsraelStart lists 300+ new developments across Israel. Request a personalized assessment, with no obligation, to find projects suitable for renting.

Sources

- Nadlan Center — August 2026 rents, WeCheck data (09/27/2026)
- Times of Israel — Housing snapshot September 2026
- Nadlan Center — Mortgage volume 2026 (09/30/2026)
- Bank of Israel — Rate decision 09/01/2026