According to the Central Bureau of Statistics (CBS), Israel home prices have risen by 6.1% over the past year. The Consumer Price Index (CPI) jumped by 0.5%, diminishing the likelihood of a near-term interest rate cut. The average home price in Q3 stood at 2.24 million NIS, while the Construction Cost Index rose by 2.3% since the beginning of the year.
By Nadlan Center
Negative home price index for the first time in 9 months
According to the home price index published today (Friday) by CBS, comparing transactions from August 2024 to September 2024 versus July 2024 to August 2024 revealed a 0.1% drop in home prices. However, comparing the current period (August-September 2024) with the same period last year (August-September 2023), prices increased by 6.1%.
The price of new homes increased by 0.1% in August-September 2024, while excluding government-subsidized transactions, which accounted for 24.4% of all deals, new home prices rose by 0.2%. Compared to the same period in 2023, prices for new homes saw a 3% increase.
The CPI, also published today, further complicates matters for developers. The index increased by 0.5% in October 2024, with a 3.9% rise since the start of the year. In the past 12 months (October 2024 vs. October 2023), the CPI increased by 3.5%. This rise in inflation could prompt the Bank of Israel to raise interest rates again, pushing back the possibility of a rate cut.
Average home price reaches 2.24 million NIS
The average price of a home in Q3 2024 was 2.24 million NIS. Compared to the previous quarter (2.33 million NIS), the price dropped by 3.7%. However, compared to Q3 2023 (2.1 million NIS), the average price rose by 6.6%.
For tenants who renewed their leases, rental prices increased by 2.2%. For new tenants (in apartments with turnover), rents rose by 4%. These changes reflect annual shifts in rental prices, as rent typically remains stable for most tenants during the year due to fixed lease agreements.
Construction Cost Index
The Construction Cost Index for residential construction rose by 0.2% in October 2024, reaching 132.8 points, compared to 132.5 points the previous month (with July 2011 as the base at 100 points). Since the start of the year, the index has increased by 2.3%.
Call for government action from builders
President of the Contractors Association of Israel, Raul Srugo commented on the publication, saying, “For months, we’ve been warning that the drop in housing supply and demand is driving prices up. The situation is even worse in the rental market, where the absence of investors, high interest rates, and economic unfeasibility of rental housing investment by large companies and institutional investors have led to constant rent increases, fueling inflation and preventing a decrease in interest rates.”
“This happens when the government lacks a cohesive housing plan with quantitative targets for increasing construction starts. There is no budget or investment in growth engines to stimulate the construction and infrastructure sectors. Immediate action is needed, including reducing purchase taxes and bringing tens of thousands of foreign workers into the country within two months by cutting red tape. The question is, can the government overcome the stagnation in construction? I doubt it, and therefore, we are likely to see continued price increases in the coming months.”
