The Israelites consider Canaan to be the Promised Land because they believed that

Because of the belief that God made the covenant with Abraham that the Canaan will belong to Abraham's descendants.

Explanation:

This belief is from the Torah (the five books of Moses). According to that, the story is beginning with moving of Abraham and his family from Mesopotamia to Canaan. God is the one who told him to do that and they made the covenant.

The convenient was about that, that Canaan will belong to his descendants and because of that statement, Canaan was known as Promised Land.