Why Are Airbnb & Short-Term Rentals in Israel So Expensive?
Many people ask why staying in an Airbnb (short-term rental) in Israel is so expensive—especially when compared to similar apartments in Europe or other destinations. The answer lies in how Israel’s real estate market works, along with regulation, taxation, and investor behavior.
1. Israel Has a Small Institutional Rental Market
Unlike countries where large companies own and operate rental buildings, most apartments in Israel are privately owned. Individual investors purchase apartments primarily for two reasons:
- Long-term appreciation
- Rental income
Leases are typically signed for one year, and tenants may stay for years—or just a single term. However, many landlords sell when they need liquidity, which creates instability in the long-term rental market.
2. Real Estate Became Israel’s Preferred Investment
Historically, high inflation made saving in banks unattractive. As a result, Israelis turned to property as a primary investment strategy. Buying an apartment provided both:
- A steady income stream
- Long-term capital growth
This trend continues to influence pricing and availability today.
3. Tax Advantages Encourage Long-Term Rentals
The Israeli government has long incentivized residential rentals. Landlords can rent out an apartment tax-free up to approximately ₪5,700 per month (subject to periodic updates).
Compare this to other investments:
- Stock market profits are taxed
- Rental income (below the threshold) is not
This creates a strong incentive for owners to prefer long-term rentals over short-term ones—at least from a tax perspective.
4. Rising Interest Rates Changed the Equation
In recent years, higher interest rates have reduced profitability for many property investors. Some landlords who expected rental income to cover their mortgage found themselves at a loss.
As a result:
- Some sold their properties
- Others looked for higher-yield alternatives, including short-term rentals
5. Short-Term Rentals (STRs) Come With Higher Costs
At first glance, Airbnb-style rentals seem like a great solution. They offer flexibility and potentially higher income. Owners can also use the property themselves for vacations or weekends.
However, the reality is more complex. In Israel, STRs are often treated as a business:
- VAT must be charged to Israeli guests
- Income tax applies
- National Insurance (Bituach Leumi) payments are required
This significantly increases the cost base for owners.
6. Operating Costs and Risks Are Much Higher
Short-term rentals come with unpredictable expenses and risks:
- Occupancy is rarely 100%
- Utility costs (especially air conditioning) can be very high
- Frequent guest turnover leads to more wear and tear
Because of this, owners must price nightly rates well above a simple “annual rent ÷ 365” calculation.
7. Building Restrictions Are Reducing Supply
Another major factor is growing resistance from residents in shared buildings. Many homeowners object to the constant flow of short-term guests.
As a result:
- Building associations are updating bylaws (“Takanon”) to ban STRs
- Israeli courts have supported restrictions in residential buildings
This is steadily reducing the number of legal Airbnb units available.
8. Why This Matters for Investors in Ashkelon
For investors considering buying property in Ashkelon, it’s important to understand that short-term rentals are not a guaranteed win.
Between:
- Regulation
- Taxes
- Operating complexity
- Community restrictions
STR investments often carry more risk than expected.
Final Thoughts
When you combine limited supply, regulatory pressure, higher operating costs, and tax implications, it becomes clear why Airbnb and short-term rentals in Israel are expensive.
For most investors—especially in cities like Ashkelon—a well-managed long-term rental remains the more stable and predictable strategy.
