# Six months below last year: what to know before buying a home outside Israel
The Home Price Index has remained below its year-earlier level for six consecutive months, the number of transactions fell by 12.2 percent in 2025, and the Bank of Israel is easing monetary policy while the European Central Bank raised rates again on 10 September. Anyone considering a purchase abroad should know one thing before anything else: how they intend to finance it.
In May-June 2026, according to the August release, the Central Bureau of Statistics Home Price Index stood at 593.6 points. That was a decline of 1.5 percent from the corresponding period a year earlier, and the sixth consecutive month in which the index was below its year-earlier level. Compared with the end of 2025 it was 1.1 percent lower, and compared with the end of 2024 it was 2.1 percent lower.
The direction needs to be stated precisely. What has persisted for six months is the negative gap from the preceding year, not an uninterrupted sequence of period-to-period declines. The monthly path is not a straight line, and the index even rose slightly in some periods. The picture is of an index eroding relative to itself a year earlier, not a continuing plunge.
The annual picture is misleading too. The official figure for 2025 shows an increase of 2.2 percent, but that is an annual average driven mainly by 2024, which ended at a yearly pace of 7.7 percent. The index peaked in January 2025 at 609.8 points. It has fallen by 2.7 percent since then through the latest release.
In volume terms, the number of transactions fell by 12.2 percent in 2025. This is a market in which fewer homes are selling while prices erode slowly, not a sharp price correction.
Against that background, the first question usually asked about buying abroad is "where is it cheap?" That is the wrong question.
Two central banks, two directions
The Bank of Israel cut its rate on 1 September to 3.25 percent, effective 3 September, and the prime rate fell to 4.75 percent. Inflation stands at 1.5 percent over the past year, far more comfortable than the European average.
Europe is moving in the opposite direction, and this has already happened rather than merely being expected. The European Central Bank raised its deposit rate to 2.25 percent in June, held it in July, and on 10 September raised it again to 2.50 percent. All three key interest rates rose by 25 basis points, effective 16 September.
The bank's own reasoning is especially relevant to an Israeli reader. Its statement says that the fighting in the Middle East continues to generate inflationary pressure and that inflation is expected to remain above target for a prolonged period. The bank forecasts euro-area inflation of 3.0 percent in 2026, 2.5 percent in 2027 and 2.1 percent in 2028, with upward revisions to the latter two years. Actual inflation was 2.9 percent in July, with a flash estimate of 3.3 percent for August. Twelve-month Euribor, the benchmark to which euro mortgages are commonly linked, crossed 3 percent during August.
The practical significance chiefly concerns those who intend to borrow. Credit is becoming cheaper in Israel and more expensive in euros, while the European bank explicitly says inflation risks are tilted upward, that it acts meeting by meeting and that it is not committing to a rate path. Both the direction and the uncertainty therefore work against someone planning to borrow in euros. But a central-bank rate is not a price quote: its effect on a particular loan depends on the benchmark, the margin and the contractual reset date. The details appear at the end of this review.
Currency: a good month, a less favourable summer
The euro became cheaper against the shekel in August, moving from 3.5114 shekels on 31 July to 3.4647 on 31 August, a decline of 1.33 percent. On a home worth 300 thousand euros, that is a difference of about 14 thousand shekels within one month.
The broader view points the other way. On 4 June the euro stood at 3.3659 shekels, meaning it has appreciated by about 2.9 percent since the beginning of the summer. Someone who closed a transaction in June did better than someone closing today.
The dollar also became cheaper in August, moving from 3.0574 to 2.9878 shekels, and it too has appreciated since June, by 3.3 percent. This is directly relevant to anyone considering Dubai. The dirham is pegged to the dollar, so a purchase there is fundamentally dollar exposure. Payment terms, instalment schedules and hedging can change the exposure in practice, but not the starting point. The peg says something about the currency only, not about Dubai property prices, rents or liquidity.
Three markets, and what the numbers say about them
Three markets stand out for an Israeli buyer in our September market ranking. It is instructive to compare them with Israel itself.
Cyprus, the destination Israelis know best, is not among them, but not because it has nothing to offer. Its numbers require separate treatment, which follows below.
| Score | Rank | Bubble risk | Cycle stage | |
|---|---|---|---|---|
| Estonia | 74.5 | 1 | Medium-high | Peak |
| Slovenia | 73.5 | 3 | Medium | Expansion |
| Romania | 66.9 | 15 | Medium | Expansion |
| Israel | 66.4 | 17 | Medium | Expansion |
The cycle stage assigned to each market is an assessment of a completed year, in this case 2024, not a real-time reading.
The table deliberately contains no yield column. A market-wide rental yield is easy to display and difficult to defend: it varies more from city to city and neighbourhood to neighbourhood than from country to country, and it depends on whether the figure is before or after expenses. Anyone who wants an actionable yield needs it for a specific property, using actual rent, management and maintenance costs, vacancy rates and the applicable tax.
Estonia leads because of low purchase taxation and strong data transparency, but it is at the peak of the cycle and carries the highest bubble risk of the three. Slovenia, in third place, has the more conservative profile: still in expansion, with medium risk, and in 2025 it recorded the sharpest growth in transaction volume among European Union countries that published data, 29.9 percent.
Romania in rank 15 is the less obvious choice, which is precisely why it is interesting. Its score is lower than those of the other two, but it is in expansion, its bubble risk is medium, and entry prices are substantially lower than in Western Europe. It enters the picture as a market where entry is inexpensive and the market is still expanding, not as a market that leads the ranking.
Financing there calls for caution. Mortgage programmes Romanian banks market to the "diaspora" generally require Romanian citizenship, so the loan-to-value ratios quoted in that context are not necessarily available to an Israeli who is not a citizen. Anyone planning to leverage a purchase should obtain a written offer from the bank, in their own name and for their own profile, before relying on the availability of financing.
Where in practice, and why
Estonia: Tallinn, Tartu and the east. The gap between Tallinn neighbourhoods is enormous. Kalamaja is around 5,300 euros per square metre and Kesklinn, the city centre, 4,750, compared with Mustamäe at 3,050 and Lasnamäe at 2,850. Ülemiste, at around 4,050, is the interesting story. This former industrial area is becoming a business campus next to the airport and will also host the terminal of the high-speed railway connecting the Baltic states. The partnership leading the project, which includes the airport authority, the railway company and the developer, speaks of an investment of roughly half a billion euros and a second city centre for Tallinn by 2030, including four residential buildings with about 550 apartments. In other words, this is a residential area still taking shape around infrastructure that has not yet been completed. In the university city of Tartu, Karlova is around 3,300 and Annelinn 2,000.
In the industrial east, Narva and Kohtla-Järve, prices are extremely low. The official report of the Estonian Land and Spatial Development Board gives average transaction prices for 2025 of 286 euros per square metre in Sillamäe and 205 in Kohtla-Järve. At prices like these, any reasonable rent produces a high price ratio, and that is precisely where caution is needed, because the ratio compensates for risk rather than signalling a bargain. These are shrinking cities with thin liquidity: a buyer should assume that a sale will take time. Narva has nevertheless seen public investment in recent years. At the Kreenholm complex, the historic textile mill abandoned since 2010, a project is converting the spinning-mill building into a cultural quarter covering about 20 thousand square metres. The historic river promenade was also extended through a mainly European-funded cross-border project completed and opened in September 2023. What we do not have is data linking those investments to housing demand, so no conclusion about prices should be drawn from them.
Slovenia: Ljubljana, the coast and the Alps. In the capital, Vič-Rudnik is around 5,250 euros per square metre and Moste-Polje 4,950. Prices are higher in historic Stari Grad, but supply there is too thin to quote a figure. Koper on the Adriatic coast offers something different, particularly the Markovec neighbourhood with sea views and new construction. Short-term renting is also a possibility there, but that is a question of licensing and the designated use of the specific property, and it also moves the buyer outside the tax profile examined in this review. Alpine Bled is an entirely different market. Mlino, Ribno and Zasip are holiday villages with guesthouses, not an apartment market.
Romania: Bucharest and Cluj. Its profile differs from the other two: an expanding market with entry prices substantially lower than in Western Europe. Bucharest is the larger market, while Cluj-Napoca is one of the country's principal technology centres, neither the only one nor the largest, since Bucharest is bigger. What distinguishes Cluj is the ratio: about 15 thousand software workers and about 1,300 companies, alongside twelve academic institutions and about 80 thousand students in a city whose population at the latest census was about 287 thousand. That composition feeds a rental market. The depth of demand in each city must be tested at neighbourhood level, not city level.
Tax: four categories, and what they do not include
The comparison below among the three countries addresses selected tax categories: purchase tax, annual tax, tax on rental income and capital-gains tax. It does not cover all of them in every country; in Slovenia, for example, purchase tax and capital-gains tax are presented, but not annual tax and rental tax. This is not a complete review of every tax issue or of transaction costs such as notary, lawyer and brokerage fees and official charges. The Cyprus section below also mentions additional levies, which does not imply that they do not exist in the other countries. The data was verified with the tax authorities in Estonia, Slovenia, Romania and Cyprus between 6 and 9 September 2026. The profile is an Israeli tax resident purchasing an ordinary residential property in their own name and treated as a non-resident in the country where the property is located.
Estonia. There is no separate purchase tax; an ordinary transaction carries a registration fee and notary costs. There is an important exception: transfers of Estonian real estate are generally exempt from VAT, but the exemption does not cover a new or substantially renovated building or undeveloped land, and VAT of 24 percent may apply in those cases. The annual tax applies only to land; buildings are not taxed. The rate ranges from 0.1 to 1 percent of land value, as determined by the local authority. Rental income is taxed at 22 percent, or 17.6 percent when the notional expense deduction is elected. Capital gains are taxed at 22 percent of the net gain.
Slovenia, and two points many people miss. The purchase tax, 2 percent, is legally the seller's obligation unless the contract shifts it to the buyer. Capital-gains tax is not uniform; it declines with the holding period: 25 percent before five years, 20 after five, 15 after ten, and zero after fifteen.
One more Slovenian point. Israel has been a member of the organisation of developed countries since 2010, and Slovenia exempts citizens of member countries from the reciprocity requirement. An Israeli does not have to establish a Slovenian company to hold property, an expensive route that many mistakenly assume is mandatory.
Romania, and two traps. There is no uniform purchase tax for an individual buyer. There is a low registration fee, calculated not from the contract price but from the higher of the contract value and the value in the notaries' market study, together with notary expenses. But the purchase of a new apartment in a transaction subject to VAT may attract VAT of 21 percent, which is an entirely different order of magnitude.
The annual tax is set locally according to the value for tax purposes rather than the purchase price, with a base residential rate of 0.08 to 0.2 percent. Two points are missed by anyone who looks only at the rate: from 1 January 2026 the tax-value table was revised substantially upward, so the same rate is applied to a much higher base; and the rate is not a ceiling, because the local authority may increase it, and may go still further for neglected property. Alongside the annual tax is a special tax on expensive property, which is not new: in 2026 its rate rises from 0.3 to 0.9 percent and is imposed on the excess tax value above 2.5 million Romanian lei.
For ordinary renting, income tax is 10 percent after a fixed expense deduction of 20 percent, equivalent to 8 percent of gross rent. Romanian health-insurance contributions may also arise; that issue neither follows automatically from property ownership nor is excluded by an express exemption. Anyone planning to rent out property in Romania needs a specific answer from a Romanian adviser because the difference between the two answers is material.
The second trap is more important than the first. On sale, tax is calculated from the transfer value, not from the gain: 3 percent when the property has been held for up to and including three years, and 1 percent thereafter. A seller pays even when selling at a loss.
There is also a legal point that deserves early attention. Romanian law restricts direct land ownership by a person who is not a citizen of a European Union state and makes it conditional on treaty arrangements and reciprocity. A building is a separate matter, but an apartment generally carries a share of the land. Eligibility to purchase therefore cannot be inferred from the land-registry extract alone and should not be taken for granted; it must be clarified with a Romanian lawyer before proceeding to contract.
And Cyprus?
It is the destination most Israelis think of first, and it is not in the table above. Its score is 66.6, rank 16, between Romania in rank 15 and Israel in rank 17. Three markets within half a point, which itself says something about the question "where is it cheap?"
There is no tax treaty between Israel and Cyprus, and most Israelis are surprised to hear it. In the Israeli Ministry of Finance register, filtered for double-taxation treaties, a search for Cyprus returns "no results found", while the same search returns treaties for Greece, the United Kingdom and the United States. Israel does not appear at all in the Cypriot Ministry of Finance treaty table, a numbered list with signature and effective dates.
The source of the confusion is worth understanding before relying on any advice: Israel and Cyprus do have an agreement on the encouragement and protection of investments, signed in 1998 and effective from 2003. It is recorded in the Israeli register under a completely different agreement type. An investment-protection agreement is not a tax treaty and grants no tax relief. An internet search will reveal sources quoting a "Cyprus-Israel tax treaty" with detailed withholding rates; that is the agreement that has been confused with one.
This does not mean that a foreign-tax credit is unavailable, since that question is determined by Israeli law. But there is no treaty mechanism on which to rely, and the Israeli 15 percent route for rental income from abroad provides no credit at all.
Rental tax is not a uniform rate of 20 percent, and for most buyers it is much lower. Under the tax reform effective 1 January 2026, the brackets are: zero up to 22 thousand euros of taxable income, 20 percent from 22,001 to 32 thousand, 25 percent up to 42 thousand, 30 percent up to 72 thousand, and 35 percent above 72,001. The exemption threshold was raised in the same reform from 19,500 euros. Taxable income is calculated after a fixed deduction of 20 percent from rental receipts.
The practical result depends on total taxable income in Cyprus, not on the property. The brackets apply to aggregate income rather than each apartment separately, so the same apartment may fall in the zero bracket for someone with no other income in Cyprus and attract a high rate for someone who has other income there. The relevant bracket must be calculated from total income rather than inferred from the size of the property.
In addition to income tax, a non-Cyprus-resident owner is liable for a health-system contribution of 2.65 percent of gross rent, not taxable income. The contribution is capped by reference to total annual income, and it is important to understand what it does not do: it does not confer entitlement to health services in Cyprus. These are two separate mechanisms applied to different bases, and liability cannot be estimated from a single rate.
A national zero is not an annual zero. The national immovable-property tax was abolished in 2017, but local owner charges, including sewerage and drainage charges, continue to apply depending on the authority and the property.
On sale there is also a levy that is rarely discussed. In addition to capital-gains tax, the proceeds from a transfer of real estate in Cyprus attract a levy of 0.4 percent, imposed on the seller. It has been in force since February 2021, and an amendment in November 2022 changed and extended the arrangement, including transfers of shares in a company holding real estate, where the tax base is determined differently and not by the real-estate sale proceeds. In a real-estate transaction the levy is calculated from proceeds rather than gain, so it applies even to a sale with no gain. In the opposite direction, Cyprus stamp duty was abolished for documents signed from 1 January 2026, reducing transaction costs on that side.
A purchase by someone who is not a citizen of the European Union requires approval from the District Officer. For an apartment buyer, the relevant route is the unit route, whose published limit is up to two units. The often-quoted 4,000-metre limit does not concern an apartment, but land on which to build a home for the buyer's own residence; that is a different route. The Ministry of the Interior states a processing time of two to three weeks and no fee, but approval is not guaranteed.
One figure deserves particular attention. In 2025, 16,171 housing units were authorised in Cyprus, an increase of 43 percent in one year and, relative to population, roughly twice the rate of approvals in Israel. The pace has not stopped either: in the first four months of 2026, 7,131 units were authorised, compared with 4,321 in the corresponding period a year earlier. At the same time, 2025 data shows that about 40 percent of sale contracts in the country were signed with foreign buyers, and about 66 percent in Paphos.
Those figures require caution. A building permit is neither a completed home nor an occupancy date: some permits are never used, and the gap between approval and completion is measured in years and varies from project to project. A buyer is not necessarily a landlord either. A home bought for personal or holiday use is absorbed on the sales side and never reaches the rental market.
The demand picture is not unequivocal either. The share of foreign citizens in Cyprus is not 15 percent, as is sometimes estimated, but roughly one quarter of residents as of the end of 2024. Yet this is a stock of residents, not a flow of arrivals, and it is not a measure of non-resident buyers. In the latest published migration series, 2024 compared with 2023, the number of arrivals actually did not grow. The resident base therefore does rely heavily on people who came from outside Cyprus, but that does not establish that arrivals are accelerating, much less that rental demand is growing.
It is consequently impossible to determine from the published data, in either direction, what will happen to Cyprus rents later in the decade as some of these permits become homes, and we make no claim to do so. What can be said is that this is a small market dependent on the movement of foreigners on both sides of the equation, supply and demand alike. A person buying there to rent is exposed to that dynamic, and its critical variable is not the entry price.
Bottom line
The divergence between the Bank of Israel, which is easing monetary policy, and the European Central Bank, which is tightening it, changes the equation mainly for those who intend to borrow. Someone planning to borrow in euros is entering a credit market that is becoming more expensive; someone raising capital in Israel is entering one that is becoming cheaper.
Three points require precision. A buyer who pays without debt does not save interest payments and gains nothing from a European rate rise. Their advantage, if any, is merely relative to leveraged buyers. Someone who mortgages property in Israel to raise the purchase price is not buying without debt but is borrowing, and is therefore exposed to Israeli credit conditions. The effect of an interest-rate decision on an existing loan depends on its benchmark, its contractual reset date and the margin. A central-bank rate is not a quote to any borrower.
Currency exposure is added to all of this: rental income in euros and loan repayments in shekels are two currencies, which is an exposure in its own right. There is no group that gains from the situation and another that loses; each financing structure simply has a different starting point. What matters is how the purchase was to be financed.
Disclaimer
Nothing here constitutes tax, legal, pension or investment advice, nor is it a recommendation to enter into or refrain from any transaction.
This is a general journalistic and economic review based on public sources as of the publication date. It does not take account of any person's circumstances, needs, financial position or objectives.
This is especially important in relation to tax. The tax rates shown are general statutory rates current on the verification date and relate to one narrow profile: an individual Israeli resident purchasing a residential property in their own name and treated as a non-resident in the property country. Any change in circumstances changes the result, including purchase through a company, business activity, development, short-term rental, joint ownership, multiple properties, a change of residence status or migration. A tax rate is not the same as a tax liability, and the tax base differs from country to country and may be an assessed value rather than market price.
Tax liability in Israel is an entirely separate question. A tax treaty does not eliminate the taxing right of the property country, and any Israeli tax credit is subject to Israeli law and its applicable limits. This review does not calculate the buyer's total tax liability and does not claim to do so.
Tax and real-estate laws and rules governing purchases by foreigners change, sometimes retroactively. Price and yield data for areas and neighbourhoods are estimates and editorial assessments, not guarantees of yield or value. Exchange rates change and may move in either direction. Past performance is not indicative of the future.
Before making any decision, consult a tax adviser, a lawyer and a qualified professional in both the property country and Israel. Responsibility for every decision rests solely with the decision-maker.
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