I think that some people borrow the money to buy an apartment. This way, they can make payments to the people they owe money to instead of paying rent. Then eventually, they finish paying them off (unlike rent which lasts forever). Hopefully, they finish the payments before their kids are in shidduchim. They can then use the money which had been going towards those payments for their kids’ mortgages and/or down payments on apartments. Also, by then the husbands should have some kind of parnassah in kli kodesh plud they no longer have to pay tuition for their kids who are no longer in school, so that money can also go towards helping their kids to buy apartments.
Basically, as you pointed out, most people in Israel consider it less-costly to own an apartment, so they either borrow, get money from rich relatives or from the previous generation (who is not paying rent since their parents bought them their apartments, so they are able to afford to help out the next generation) in order to be able to buy. And then they are in a better position to help the next generation.
Some people manage by continuously selling their apartments as the value goes up and buy in newer (less expensive) areas. I don’t know how many actually do that, but I heard of at least one person who did that.
And some people create take some space from their apartment and add on to it in order to create another apt. they can rent out to help them pay the mortgage. Or they create an apt. out of their machsan or parking lot to rent out.
I think that basically the way it works is that if you are part of a system, you know how that system works and how to manage within that system. But if you did not grow up in that system, you are pretty clueless. That is why Americans in Israel have such a hard time.
I am still trying to figure all this out myself. I have a hard enough time managing as a single girl, so I can’t for the life of me figure out how it works when you have an entire family to support.