Have the prices of homes with protected rooms risen compared with the prices of homes without a protected room, since the war began in October 2023? Two weeks ago, the Bank of Israel published a surprising study, which found that the premium on a protected room since the start of the war – the price difference that the market prices for an apartment with a protected room compared with an apartment without a protected room – has actually decreased when it comes to buying apartments, but has risen significantly in the rental market.
However, another study commissioned by “Globes”, and conducted by the Israel Real Estate Appraisers Association, did not compare time periods, but rather home prices as of now, and it shows much bigger differences than those found by the Bank of Israel study.
Bank of Israel: 99,000 deals since 2023
In the Bank of Israel study, researchers, Yossi Yakhin and Aya Talmon, examined some 99,000 deals carried out since 2023, two-thirds of which were second-hand apartments, as well as ads for the sale and rental of apartments.
The study found that on the eve of October 7, 2023, apartments with a protected room were about 8.2% more expensive than similar apartments without a protected room, and that this premium had fallen to about 6.4% by the end of 2024. However, initial findings from the Iran operation indicate that this premium jumped to levels of 11%, although the significance of this data is not yet fully clear.
In contrast, the rent sought in apartment rental ads showed a slight increase in the premium with the outbreak of the war, and starting in May 2024, after the first missile attack from Iran, continued to rise. From May 2024 until December 2024, the premium for a protected room was 3.7%-4.1% higher than its level in the first nine months of 2023, before the outbreak of the war.
The Bank of Israel study did not examine the reasons for these results, which contradict the accepted narrative that the price difference widened between apartments with a protected room and those without a protected room. In their assessment, during the period studied, there was an expectation of an improvement in the security situation after the end of the war, and considering that the date of occupying the apartments was estimated by the buyers as coming after the end of the war, this lowered the premium for the protected room.
On the other hand, rental deals are for shorter terms, and therefore tenants examined the situation according to current criteria and were willing to raise the rent they pay, for an apartment with a protected room.
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High-end home prices rising regardless of protected rooms
The study also conducted an initial examination of apartment prices during the Iran operation, and found a certain increase in the premium for the protected room, both in apartment prices and in rent, but at least at this stage their statistical significance is unclear.
When the Bank of Israel researchers examined the big cities, they found a significant decrease in the premium for protected rooms received in Tel Aviv and Ashdod, and a significant increase in Beersheva and Netanya. In the remaining places, the findings are described in the study as non-significant, but there were places, such as Haifa and Jerusalem, where a strange situation is described, in which apartments receive a premium for not having a protected room. The researchers have no answer as to why this occurs.
“Globes” possible explanation for this is that apartments with a protected room are often located in relatively new neighborhoods, while apartments without a protected room tend to be located in older and more sought-after neighborhoods, where apartment prices are higher. For example, the expensive Rehavia and Beit HaKerem neighborhoods in Jerusalem, most of which do not have protected rooms, compared with Kiryat Yoval, where there is a wave of urban renewal with relatively cheap apartments.
At the same time, the researchers also found that the owners of apartments with protected rooms, who put them up for sale started with high initial prices, which represented a very high premium for protected rooms, and later lowered them when it became apparent that they had no buyers at these prices.
Real Estate Appraisers Association: 4-room apartments in five cities
The second study, which was conducted exclusively for “Globes,” was by the Real Estate Appraisers Association was different in almost every aspect, from the examination method to the final conclusions.
The Real Estate Appraisers Association examined the price differences of four-room apartments with a protected room versus without a protected room in five cities: Tel Aviv, Jerusalem, Haifa, Ashkelon and Nahariya, over the last three months. Nahariya and Ashkelon experienced more rockets from Gaza and Lebanon, while Jerusalem largely remained “out of the war.”
The association did not make do with just comparing prices, but made the comparisons based on prices per square meter, because the higher absolute price of apartments built in recent decades stems, among other things, from the differences in apartment sizes.
The Association explains, “Apartments built in the 1950s, 1960s and 1970s usually have a smaller number of square meters, with an average of about 80 square meters for a four-room apartment. In contrast, the more modern construction of the 2000s and onwards produced an average four-room apartment with an area of about 100 square meters. Therefore, the more correct comparison is the average cost per square meter.”
The Association further explains that there are additional parameters that affect apartment prices, primarily age, since apartments without a protected room are also older. The focus on the last three months was intended to try to eliminate additional parameters that could affect the price of the apartment.
The study found that the highest price difference per square meter between apartments with a building permit and apartments without a building permit is in Tel Aviv, at about 20%. Haifa, Ashkelon and Nahariya show gaps of about 19%. These are cities that were hit by many missiles during the war, but since the defeat of Hezbollah in Lebanon and the elimination of Hamas’s rocket capability from the south, there have been almost no missile alerts in Ashkelon and Nahariya.
Apart from this, even in Iran operation, Ashkelon and Nahariya were not targeted by Iranian missiles, compared with Haifa, which suffered several direct hits. This may have had a slight impact on the relative price gap, which is slightly higher in Haifa.
In Jerusalem, there is a significantly smaller difference in the gaps between the prices of apartments with and without protected rooms, compared with other cities examined. The explanation for this is that there were very few missiles targeting the city.
In addition, the Association explains, “There are neighborhoods and areas in Jerusalem that are in greater demand, and new construction is less substantial there, and therefore the lower the supply there and the higher the demand, the price difference narrows, even though these are old apartments without protected rooms.”
This explanation, which applies primarily to the haredi neighborhoods, can probably also explain the negative premium received by apartments with a protected room in Jerusalem.
A similar study conducted by “Globes” on apartment prices in the last six months in Tel Aviv’s 3rd and 4th (rova) districts revealed findings similar to those of the Appraisers Association: new apartments and apartments with a protected room reached prices of about NIS 71,000 per square meter, while apartments without a protected room rose by about NIS 54,000 per square meter. In these places, the differences found were higher, but these are two of the most expensive neighborhoods in the city, so it is likely that the differences are also greater.
The question is whether increasing the price difference between apartments with a protected room and apartments without a protected room could lead to a reduction in tenants’ demands in urban renewal projects, for additional space. The chairwoman of the Appraisers Association chair Nehama Bogin, does not believe so. “We are not at a stage where tenants will give up on changes in the urban renewal process. For tenants, urban renewal is an opportunity to improve the quality of life and not just an economic return on paper. Following the war, there is a certain acceleration on the part of tenants who realize and understand the importance of an apartment with a protected room and a new building and do not delay the process, and neither do they give up on increasing the size.”
The chief economist: Demand grew after the missile hits
Another study conducted by the Ministry of Finance chief economist found that demand for apartments with a protected room increases mainly after significant missile damage.
The chief economist’s May review of the housing market found that the Iranians are the best promoters of sales of apartments with a protected room, since after each time missiles were launched from there in May and October 2024 and as part of the Iran operation in June 2025, sales of apartments with a protected room increased. Between attacks, the homebuyers reduced demand for protected rooms.
This indicates that our memory is probably shorter than we thought during the war, and that already today people are willing to compromise on unprotected apartments, but in places that suit their tastes and needs. If this is indeed the case, and the relative calm from missiles continues, the price differences between protected and unprotected apartments that the Bank of Israel found will continue to narrow.
Published by Globes, Israel business news – en.globes.co.il – on August 7, 2025.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.
